SpaceX requires employees to agree to some unusual terms related to their stock awards, which have a chilling effect on staff, according to sources and internal documents viewed by TechCrunch.
So, while Elon Musk is an asshole, and these terms are awful, there is more to it:
They involve stock awards, which are given by the company to the employee. They can either be options (which give you a choice to buy at a certain price, and presumably you wouldn’t do that unless you can sell for higher price), or outright stock grants . They are given as part of compensation, and vest on a set timetable. (So, if someone was given 1000 shares, the employee would still see 1000 shares in some account, but they may only be able to access 100 of them every six months). So, this whole discussion is about shares the company gave to the employees in the first place.
Then, the other wrinkle is that SpaceX is a private company. That means that employees can’t just go sell their shares on the open market. So SpaceX graciously offers to buy back these private shares at whatever they think they are worth at the time. While this sounds fishy, the only other real alternative is for the employees to hold on to the shares and sell them if they go public…
… However, simply receiving the shares when they vest is a taxable event. So if SpaceX didn’t offer some way for mere mortals to turn their shares to cash, then in effect they would be saddling them with an enormous tax burden and no way to raise the cash to pay it. So they have to do it this way.
Do they really need to confiscate an employees shares if they hurt Elon’s fee-fees? Of course not. But that’s the only dumb bit here. The rest is pretty standard for a private company who attracts workers with stock benefits.
In public companies, it’s not really a scam. It’s a legitimate tool for these companies to get and keep the key people they need. The stock benefits are over and above their salary, after all, and equate to real money.
It’s the startups and private companies where this all gets a bit scammy, because there is no liquid market for these shares. And those companies are more likely to offer extra stock instead of a competitive salary, but that stock may not be able to be cashed out until the company goes public, forcing the employees to stay until the IPO, unless they give up that theoretical big payday.
As long as you exercise all the stock they give you one way or another, you can leave whenever you like. You still own the stock if you leave. The real scammy part that no one seems to mention is to give really long vesting periods
It is part of the calculus of employment. You get these shares and you deem if they are worth something (you think the company is compatently run and will IPO) or you think they are worthless.
You can talk about how pointless and probably predatory that is, but that is the current system we inhabit.
Fwiw I walked away from imaginary shares. My public company went private by a hedge fund. Honestly hedge funds are good at making short term cash so maybe that was a bad decision, but I wanted no part in the next year or more of layoffs. Plus my imaginary stock was still on a vest cycle so it would vest probably after the stock was skyrocketing.
I have read that the actuality includes a loophole you didn’t speak of:
Once someoen owns shares, they can privately-sell them, or give them away, or will them to someone…
Once enough people have done this, the “private” company becomes actually publically-traded, though not on any exchange…
…creating some legal difficulties, re regulations.
From that bit, which I never would have known to even consider ( some article I read, some years ago ), then it looks like people can sell their shares to another private-individual.
Maybe some jurisdictions prohibit that.
I don’t know, I’m just identifying an angle people apparently haven’t commonly considered.
To think that amount of wealth can be earned is fucking naive. More than naive. More than how a child is naive. It’s willful ignorance, full stop, and if you are for it, you’re the enemy of the people.
If you know insider information that’s not public (A company misbehaved being one of them) you are not supposed to trade stock to financially gain from it.
Now that’s what you’re supposed to do… Politicians have proven that’s rules just for peasants, and most stock traders heavily benefit from this type of information, and unless your Martha Stewart for some reason, you get away with it… But my point is legally, if you know they misbehaved, that’s immediately insider information?
Edit: I misunderstood the headling/rule. Sorry. Quite a shit thing that granted stock can be revoked, especially after you pay taxes. I wonder how legal it is, because if they can revoke it, is it actually yours and thus do you have to pay taxes on it?
It’s if SpaceX decides that the employee misbehaved, not the company that misbehaved, that allows them to ban that employee from selling private stocks. Also if you leave the company for any reason you lose out on 6 months of them or if you are fired they will buy back all of your stocks at $0, all the while you are paying taxes on your stocks. So the employees could possibly end up losing money from taxes on something they never actually got because the company said so.
Also, i guess the next question is what counts as misbehaved since the company gets to decide? Does calling in sick for a day count? What about if they want you to do something that they legally can’t ask you to do and you say no? It sounds more like a ploy to control the workers even more, whether or not what SpaceX does is legal. Sure if its not legal they can sue and maybe even win, but SpaceX could drag out the suit till it has to be dropped from a lack of funds on the employees side or make it not worth the amount they would win.
Oops I misunderstood the direction. (I think it was if the employee deems they misbehaved. (I assumed “It” was the employee, not SpaceX. More obvious in hindsight I guess, my bad.)
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Sounds like a healthy work environment
So, while Elon Musk is an asshole, and these terms are awful, there is more to it:
They involve stock awards, which are given by the company to the employee. They can either be options (which give you a choice to buy at a certain price, and presumably you wouldn’t do that unless you can sell for higher price), or outright stock grants . They are given as part of compensation, and vest on a set timetable. (So, if someone was given 1000 shares, the employee would still see 1000 shares in some account, but they may only be able to access 100 of them every six months). So, this whole discussion is about shares the company gave to the employees in the first place.
Then, the other wrinkle is that SpaceX is a private company. That means that employees can’t just go sell their shares on the open market. So SpaceX graciously offers to buy back these private shares at whatever they think they are worth at the time. While this sounds fishy, the only other real alternative is for the employees to hold on to the shares and sell them if they go public…
… However, simply receiving the shares when they vest is a taxable event. So if SpaceX didn’t offer some way for mere mortals to turn their shares to cash, then in effect they would be saddling them with an enormous tax burden and no way to raise the cash to pay it. So they have to do it this way.
Do they really need to confiscate an employees shares if they hurt Elon’s fee-fees? Of course not. But that’s the only dumb bit here. The rest is pretty standard for a private company who attracts workers with stock benefits.
Sounds to me like the scam is to attract workers with stock benefits.
In public companies, it’s not really a scam. It’s a legitimate tool for these companies to get and keep the key people they need. The stock benefits are over and above their salary, after all, and equate to real money.
It’s the startups and private companies where this all gets a bit scammy, because there is no liquid market for these shares. And those companies are more likely to offer extra stock instead of a competitive salary, but that stock may not be able to be cashed out until the company goes public, forcing the employees to stay until the IPO, unless they give up that theoretical big payday.
As long as you exercise all the stock they give you one way or another, you can leave whenever you like. You still own the stock if you leave. The real scammy part that no one seems to mention is to give really long vesting periods
It is part of the calculus of employment. You get these shares and you deem if they are worth something (you think the company is compatently run and will IPO) or you think they are worthless.
You can talk about how pointless and probably predatory that is, but that is the current system we inhabit.
Fwiw I walked away from imaginary shares. My public company went private by a hedge fund. Honestly hedge funds are good at making short term cash so maybe that was a bad decision, but I wanted no part in the next year or more of layoffs. Plus my imaginary stock was still on a vest cycle so it would vest probably after the stock was skyrocketing.
I have read that the actuality includes a loophole you didn’t speak of:
Once someoen owns shares, they can privately-sell them, or give them away, or will them to someone…
Once enough people have done this, the “private” company becomes actually publically-traded, though not on any exchange…
…creating some legal difficulties, re regulations.
From that bit, which I never would have known to even consider ( some article I read, some years ago ), then it looks like people can sell their shares to another private-individual.
Maybe some jurisdictions prohibit that.
I don’t know, I’m just identifying an angle people apparently haven’t commonly considered.
_ /\ _
All Musk companies are sweatshops.
To think that amount of wealth can be earned is fucking naive. More than naive. More than how a child is naive. It’s willful ignorance, full stop, and if you are for it, you’re the enemy of the people.
I mean… isn’t that also a legal thing?
If you know insider information that’s not public (A company misbehaved being one of them) you are not supposed to trade stock to financially gain from it.
Now that’s what you’re supposed to do… Politicians have proven that’s rules just for peasants, and most stock traders heavily benefit from this type of information, and unless your Martha Stewart for some reason, you get away with it… But my point is legally, if you know they misbehaved, that’s immediately insider information?
Edit: I misunderstood the headling/rule. Sorry. Quite a shit thing that granted stock can be revoked, especially after you pay taxes. I wonder how legal it is, because if they can revoke it, is it actually yours and thus do you have to pay taxes on it?
Didn’t Martha Stewart go to jail?
That’s kind of the point I was making. (She was the one who didn’t get away with it)
It’s if SpaceX decides that the employee misbehaved, not the company that misbehaved, that allows them to ban that employee from selling private stocks. Also if you leave the company for any reason you lose out on 6 months of them or if you are fired they will buy back all of your stocks at $0, all the while you are paying taxes on your stocks. So the employees could possibly end up losing money from taxes on something they never actually got because the company said so.
Also, i guess the next question is what counts as misbehaved since the company gets to decide? Does calling in sick for a day count? What about if they want you to do something that they legally can’t ask you to do and you say no? It sounds more like a ploy to control the workers even more, whether or not what SpaceX does is legal. Sure if its not legal they can sue and maybe even win, but SpaceX could drag out the suit till it has to be dropped from a lack of funds on the employees side or make it not worth the amount they would win.
Oops I misunderstood the direction. (I think it was if the employee deems they misbehaved. (I assumed “It” was the employee, not SpaceX. More obvious in hindsight I guess, my bad.)
How is that even legal?
deleted by creator
I learned that from Jafar in Aladdin!
It’s private equity. So presumably they have more discretion around buy backs than public stocks.