
Ex-Uber employees are being surprised by big tax bills - sikim
https://www.nbcnews.com/tech/tech-news/ex-uber-employees-are-being-surprised-big-tax-bills-they-n1233699
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paxys
This story completely misses what the lawsuit is actually about. It isn't just
a bunch of employees who are pissed that the stock went down.

Employees' RSU agreements stated that Uber would deliver their shares 6 months
post-IPO. A few days before the IPO Uber decided to amend the agreement and
accelerate the vesting, so shares would be available on IPO day itself.

Why did they do this? Uber is legally required to withhold taxes during a
vesting event. The most common way to do this is to sell a percentage of the
shares immediately on vest. This, however, increases the total number of
shares in the market and depresses the stock price. To avoid this, Uber
decided to pay for the taxes out of their own pocket and claim a percentage of
the shares for themselves (basically a private stock buyback).

By moving the vest date up, Uber gambled on the fact that the stock price
would be higher in 6 months, and the move would thus benefit both themselves
(less out of pocket spend for withholding) and the employees (difference taxed
as capital gains rather than regular income). Instead the opposite happened
and both parties lost out. More importantly Uber reduced their own risk by
locking down their total liability at the IPO date itself and exposed their
employees to the whims of market fluctuations.

~~~
psds2
Thanks. The article initially read as if people had held their stock as if it
was an investment and are mad they didn't sell to cover the tax bill sooner.
After your explanation it is much clearer.

tl;dr Uber accelerated vesting of employee grants so that they happened during
the lockout period. Also they could have proactively taken more out to cover
taxes for the employee but chose instead to take the minimum out.

~~~
paxys
> Also they could have proactively taken more out to cover taxes for the
> employee but chose instead to take the minimum out.

They didn't do this for the same reason - they were paying for the withheld
taxes themselves.

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carlosdp
This seems... spurious. Granting IPO stocks on IPO day is beneficial if the
stock goes up, and "detrimental" if the stock goes down from the initial price
instead, which is what happened with Uber.

The article makes it look like Uber tried to short change employees, but if
the stock had rocketed up, they would have saved employees a ton of money in
taxes because the gain from IPO price to the price when the lock-up expired
would have been taxed as capital gains.

They also make it looks like these people are all making pennies because the
stock didn't do well, which we all know is obviously not the case (especially
if they are engineers).

Side note: when people bash ISOs because they are evil or something, I just
think of tax implications like this. This wouldn't happen if they were options
instead of RSUs.

~~~
user555555555
Did anyone really think the stock was going to rocket up?

~~~
yumraj
Yes, everyone who went long on the day of the IPO.

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dehrmann
Suppose you're at Uber, got your shares on IPO date (May 9) and sold 6 months
later (~Nov 9), wouldn't the tax shenanigans be a wash for you? You were taxed
when they vested, so the new cost basis would be the IPO price, and you'd get
to claim a loss when you sold?

It's a little different if you held into 2020, though. Then you'd be on the
hook for the higher taxes, but again, you should still be able to eventually
claim the loss, so as long as you're in the same tax bracket, it'd be OK.

~~~
paxys
> You were taxed when they vested

You were taxed the minimum amount (37%) when they vested, but likely need to
pay a lot more than that yourself.

~~~
scarface74
Where did 37% come from? It would usually be around 22%-24% and whatever your
state tax rate is.

~~~
dehrmann
37% is the highest federal marginal tax rate. It starts at $510,301, which
might kick in for a decent number of Uber shareholders at IPO.

That's also the tax rate, not the withholding rate.

I have no idea what they meant by "but likely need to pay a lot more than that
yourself," unless that was a reference to state income tax. 37% is the highest
bracket. It's higher than AMT. I'm not sure under what circumstances you'd owe
more than 37%.

------
phamilton
Lawsuit at [https://uberrsuclaims.gallo.law](https://uberrsuclaims.gallo.law)

~~~
user555555555
Is there any downside to joining that lawsuit if you qualify?

~~~
dehrmann
It's a class action, so it depends if it's opt-out or opt-in. If it's opt-out,
you'll be in the class by not taking any action. The downside to class actions
is usually that you can't sue on your own. You might also disagree with the
merits of the case, so there could be an ethical concern on your end. You also
might not like how much your lawyer is getting paid.

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lacker
You have to read to paragraph #17 before you get the information the story is
really about.

 _Uber delivered shares to its employees on the day of its IPO in May 2019,
meaning employees would be taxed at the price of $45 a share. But the
employees were restricted from selling their shares for six months, by which
point the price had fallen to around $27 a share._

This definitely sucks for the employees. But it isn't really clear that Uber
did anything wrong. In cases where there's an IPO pop, and employees want to
hold on to the stock for a while, this can be good for employees, because more
of their income happens via capital gains.

To me, the real lesson is that our tax code is stupid, because it treats "a
share of stock that you are given on day X, but may not sell until day X+180"
and "a share of stock that you are given on day X+180" in different ways, even
though they seem exactly the same to the employee.

~~~
scarface74
Why is that stupid? I own the stock on day X (and ignoring the lock in
period), it’s part if my compensation that I could sell and by any other
stock.

~~~
mchusma
> Why is that stupid? I own the stock on day X (and ignoring the lock in
> period), it’s part if my compensation that I could sell and by any other
> stock.

He means that if I offered you stock with a 6 month lockup, or a stock with no
lockup, you would prefer the second, and value it much higher.

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ghufran_syed
are you allowed to short the stock during the period when you are not allowed
to sell the RSU’s? In other words, is it possible to create a liability (the
short position) that exactly offsets your asset (the RSU’s that are
‘delivered’ but that you can’t sell)?

~~~
beojan
You create a short position by selling borrowed shares.

