Sorry, this is totally insane. The author said the strike price on his options is $0.27. Gitlab is preparing to IPO at about $66, which would make his 15,000 shares worth nearly $1 million. He's going to throw that away because he's disgruntled with the company?
Let this be a reminder that the market could not care less about things such as ethics or keeping your employees happy and productive. Or the environment, or following laws, or anything else. It only cares about current and future numbers. You, as an employee, are a number - and a not very important one.
If anything, the stock price tends to go up when a company announces layoffs(sometimes even if what prompted that was financial distress).
The Borg Collective could go IPO on "Assimilation Enterprises Inc" and it would likely have an outstanding valuation.
When making financial decisions, it's one thing to vote with your wallet. It's another thing to not want to 'invest' in a company because they wronged you in some way. It was a business transaction to them, it should be a business transaction to you.
I get that the author had all reasons to think the company would go under (high churn for one, competition, etc), which would make his options worthless if that were the case.
Ultimately though, he got offered a bunch of options for a small price. There are drawbacks to exercising them, as he pointed out. But the way he was personally treated should not have factored in his decision.
The article is 4 years old. I'm not saying it was a smart move, but at the time he would have had to pay taxes that he might not have been able to afford. I know people that left SpaceX options on the table because they couldn't afford the taxes.
Also, brokers who create a secondary market for this equity will also arrange financing, but it depends on the "hotness" of the equity.
SIDE NOTE: If you have SpaceX stock, and you're going to leave it on the table due to taxes, reach out to me and I can arrange for something also. But go to ESOFund, etc first of course - those are professional outfits.
how much was the 409a valuation in 2017? $2-$3 a share? 15000 at $3 is $45K. assume all profit, lets say between federal and state he had to pay 40% on that (assuming its not long term capital gains, might very well be, and he's in a high tax state and has a high yearly income). so he would have to pay another 18k at most on top of the few thousand to excercise his options). though possibly less, as I said about long term gains.
18k isn't a small chunk of change, but it should be managable by most engineers. going from 4000 (.27*15k) to 20+K is a big jump, but it shoudn't be what scares you away.
They would get diluted if the company did something like a three for one trade (which happened to me and I know Gitlab did not), but in the case of an IPO there isn't dilution. Dilution matters when a company is getting bought by another company.
Tomorrow on the 14th of October 2021, GitLab is going to the public markets and will be priced around $60 - $66 a share. So this person threw away his $1m worth of stock options because of GitLab's culture.
Most startups aren't valued at $1.5 billion, which GitLab was at the time this article was written. Once a startup reaches that valuation, it's already been mostly de-risked.
Ehhh but... $4,000 to exercise the shares? You have to be REALLY REALLY confident a startup is going to 100% no-soft-exit fail to not take that bet, given the vastly positive payout even an acquihire exit would give, given how cheap that strike price is.
$4,000 to exercise and $250,000 in taxes on shares that they wouldn't be able to sell for another four years. The AMT heavily punishes exercising options in pre-IPO companies.
$4000 to exercise, but a lot more in taxes. Given that his shares were worth about 1/6 of what they are now, and assuming the FMV for tax purposes was about 1/3 that, he would have to pay income tax on $60k worth of paper gains. That's an additional 20-30k depending on the state.
https://www.sec.gov/Archives/edgar/data/0001653482/000162828...
Edit: I thought this was a recent post, didn't realize this was from 2017.