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Bolt Financial's loans come due (axios.com)
bombcar 650 days ago [-]
> A Bolt spokesperson says that only a "single digit" number of laid-off employees took out the loans, despite more than 200 people losing their jobs, and that the aggregate amount was below $200,000. Moreover, she says the company plans to "work with" those individuals.

If the amount was less than $200k, which is about the salary for a single employee these days, Bolt should just have annulled them entirely. The PR alone would be worth more than the $200k.

JumpCrisscross 650 days ago [-]
> Bolt should just have annulled them entirely

These loans were made cashlessly as part of an early option exercise. That is steeped deeply in the internal revenue code. The forgiven principal would be at the very least income. Then the tax benefits from the early exercise would retroactively apply with penalties and interest. All of this assuming the IRS doesn't view the move as a heads I win (if the company does well, a cashless loan produces early exercise tax benefits) tails you lose (if the company does badly, the loan is forgiven and there is no downside to the dodge).

I'm somewhat blown away by this whole thing. Leverage to finance an already-leveraged derivatives position on illiquid stock. From the issuer of said stock. Who is also the borrower's employee. That's both risky and dodgy! Bolt positions the "below $200,000" sum as a win. I don't see it that way. That's below the lower bound of the accredited investor income test. The people taking out these loans by legal definition couldn't afford the risk. Yet Bolt doubled down and gave them leverage?

onlyrealcuzzo 650 days ago [-]
This is sort of similar to what Evergrande was doing with executives, right?

IIUC, Evergrande strongly "encouraged" execs to take loans (secured against their income - which was considerable) to buy Evergrande "investment products".

Obviously, this was just a way to pay employees with their loan. If things blew up - the employee is completely screwed. If things don't blow up (which seems unlikely when an employer has reached this level of desperation) - then it's still not clear it was worth the risk premium to the employee.

This literally feels like something from a dystopian novel - where you take out loans to get your salary - and you only actually make money if your company grows 10x in one year - and even in that case your benefit is slim - while the VCs and founders walk off with 85% of the gains.

Hardly anyone understands finance - and most people underestimate how greedy some people can be. I feel like there would be no end to suckers who would fall for this trap.

JumpCrisscross 650 days ago [-]
> where you take out loans get your salary - and you only actually make money if your company grows 10x in one year - and even in that case your benefit is slim - while the VCs and founders walk off with 85% of the gains

Better: the VCs own stock with liquidation preference over the common stock they loaned you money to buy. If there's venture debt, they are also part of the estate that will be paid by those loans if the company goes bankrupt.

This all smells. Especially given, to my knowledge, Bolt didn't let even its employees take liquidity in their shares through traditional channels.

toomuchtodo 650 days ago [-]
Can the SEC pursue Bolt for this?
berberous 650 days ago [-]
For what? This thread is full of misunderstandings. What is it you think Bolt did that the SEC should pursue them for? If it’s alleged they fraudulently hid risks, etc., it’s one thing, but so far all that seems to have occurred is they offered something that has pros/cons, disclosed risks, half wanted to take the risk for the pros, and in hindsight, perhaps it was a bad deal since valuations are tanking industry wide.
JumpCrisscross 650 days ago [-]
> what is it you think Bolt did that the SEC should pursue them for?

Bolt offered, with multiple conflicts of interest, what are essentially margin loans to potentially unsophisticated borrowers. The $300 credit for a financial advisor the CEO tweeted about should, alone, be presumptive.

To be clear, I don't think anyone did anything intentionally wrong. (Also, I learned about this yesterday, so there’s that.) But wanton incompetence bordering on--perhaps crossing into--negligence, enabled by a Board that absolutely should have known better, can and should create liability.

chris11 650 days ago [-]
Employers cannot replace financial advice from an advisor with a fiduciary duty. Providing general education is good, and so is getting them free sessions with a financial advisor. But I don't totally agree they should be liable.

This was an incredibly risky program, and I don't understand how Bolt was valued last year. But engineers were potentially sitting on a life changing amount of money. Not exercising could have cost engineers hundreds of thousands in additional taxes if Bolt had a great IPO. They needed to get financial advice from an independent advisor.

onlyrealcuzzo 650 days ago [-]
The VAST majority of employees at Bolt would not get life-changing amounts of money at an $11B valuation.

Unfortunately, they'll probably never be able to sell their shares for even a fraction of that amount anyway.

The first 5 engineers would be incredibly lucky if they got 0.1% - who knows how many of them fully vested and still have shares. I'm guessing less than half. There's MAYBE one person who was looking at close to $11M.

Engineers after that would be incredibly lucky to even get 0.01% of the company. That's $1.1M. Again - I'd be surprised if there's even 5 fully vested that still have shares.

And even if they still have the shares, they'll be lucky to sell them at a $2B valuation - let alone $11B. So cut those numbers by 1/5th (or more).

Bolt would've been a SCREAMING success for a startup. Unless you were engineer #1-5 - you'd be better off as an L4 at FAANG.

berberous 650 days ago [-]
What conflict of interest?

The company tried to do something beneficial for its employees, although perhaps it was misguided. They gained nothing here except the marketing benefit of trying to be employee friendly.

Margin loans are risky because you can get liquidated and lose your other principal. This was a cashless loan, that was only 50% recourse, so the only risk is that you may have to pay back half of what you bought the stock at if it ends up worthless.

I don’t think there was any incompetence or negligence here, and even if there was some incompetence, that’s not a theory of liability.

JumpCrisscross 650 days ago [-]
> What conflict of interest?

Issuer is the lender is the employer. This is a mess of conflicts.

> company tried to do something beneficial for its employees, although perhaps it was misguided

I agree. (Though it ignores the stupidly simple, entirely common alternative: cut the loan crap and just give them the money.)

> was a cashless loan, that was only 50% recourse, so the only risk is that you may have to pay back half of what you bought the stock at if it ends up worthless

For that 50%, it’s identical to a margin loan. We regulate those because lending against magic numbers that go up is a consistent failure mode in capital markets.

fnordpiglet 650 days ago [-]
No, and not just because it’s not a publicly traded security. They did nothing illegal. Maybe it should be but sadly it’s not.
JumpCrisscross 650 days ago [-]
> it’s not a publicly traded security

FYI, this is irrelevant with respect to the SEC's jurisdiction [1].

[1] https://www.sec.gov/oiea/investor-alerts-bulletins/ib_privat...

fnordpiglet 650 days ago [-]
Your link outlined that unregistered securities don’t have oversight by the SEC and outlined how you better be careful what you’re getting into. It didn’t outline how the SEC regulates them beyond limits on what you can do with them without registering them. They wouldn’t be generally involved in non public shares agreements.
JumpCrisscross 649 days ago [-]
> unregistered securities don’t have oversight by the SEC

The SEC created a safe harbor for registration. The Securities Act of 1933 regulates all securities [1]. This is why private companies issuing shares have to hire securities lawyers.

[1] https://en.m.wikipedia.org/wiki/Securities_Act_of_1933

rangersanger 650 days ago [-]
>this was just a way to pay employees with their loan

This feels like a more complex, insidious version of company scrip. At the end of the day, you’re getting paid in fake company money that’s worthless if they go belly up.

onlyrealcuzzo 650 days ago [-]
It is not worthless! That's typical startup equity (common stock for employees at least).

The whole point is you're in debt (against worthless equity). It's negative worth!

650 days ago [-]
dhd415 650 days ago [-]
>>I'm somewhat blown away by this whole thing. Leverage to finance an already-leveraged derivatives position on illiquid stock. From the issuer of said stock. Who is also the borrower's employee. That's both risky and dodgy!<<

It's risky, but not necessarily dodgy. Many employers do not even permit early exercise and I wish more did as I could have substantially reduced my tax burden in some situations. Taking loans for early exercise is risky, but ultimately, we're adults who are responsible for our own decisions. Certainly it would be bad if Bolt misled employees into thinking it was a risk-less proposition, but I've not heard anyone claiming that.

>>Bolt positions the "below $200,000" sum as a win. I don't see it that way. That's below the lower bound of the accredited investor income test. The people taking out these loans by legal definition couldn't afford the risk. Yet Bolt doubled down and gave them leverage?<<

If the aggregate loan amount to laid-off employees was $200k, that says nothing about whether they qualified as accredited investors. Further, the accredited investor designation is an arbitrary one. It's perfectly possible to not be an accredited investor and still be able to afford the risk of early option exercise.

mike10921 650 days ago [-]
"Taking loans for early exercise is risky, but ultimately, we're adults who are responsible for our own decisions." Yes, agree. If the situation was reversed and these employees made money from their investment no one would be complaining.

My guess is overall Bolt was actually being nice to their employees and allowing them to get in early on the action (i might be wrong but i've been in similar situations and usually the intent is good)

dhd415 650 days ago [-]
I agree. I don't see any way that Bolt benefits from having outstanding loans to employees for early option exercise, so all this criticism of them seems misplaced. Say what you want about their business model, valuation, etc., but this looks to me like an honest attempt to help employees with early option exercises. Stock options are risky at any juncture, but I appreciate having the option to exercise early as the tax benefits can be substantial.
chris11 650 days ago [-]
Agreed. The biggest issue I have with it is only having 90 days to repay if you leave. I hope they company works with those individuals, a few people might be in some serious trouble. And I'm curious how much was loaned, it's 200k just from the people who were laid off.

But I'm not sure how Bolt significantly benefit financially from this program. And $200k is not a ton of money for a unicorn. If you're an early employee at a unicorn you can work with 3rd parties to make more aggressive financial decisions.

650 days ago [-]
tootie 650 days ago [-]
This is like eating your own dog food then eating the dog.
yardstick 650 days ago [-]
> These loans were made cashlessly as part of an early option exercise. That is steeped deeply in the internal revenue code. The forgiven principal would be at the very least income. Then the tax benefits from the early exercise would retroactively apply with penalties and interest.

I guess then the solution would be some form of redundancy payment, sufficient after taxes to cover the loan. The ex-employee could at their discretion use the payment to cover the loan. Or not. This way you’d avoid IRS penalties.

slcjordan 650 days ago [-]
Perhaps they plan to lay off a lot more of those employees in the next round and they want to get the process figured out early?
blinded 650 days ago [-]
or they use the restructuring as a valid reason to do a layoff and get rid of "dead weight"
Razengan 650 days ago [-]
Can someone please ELI5 the parent comment?
bombcar 650 days ago [-]
Stock options (sometimes?) have an exercise date. If you don't exercise by that date, you give up on the options.

But some of them would incur a tax liability at option exercising (the IRS values the "gain" at "stock price - option exercise price" and I believe now causes mark to market at the exercise time?) which would need to be paid also.

Bolt offered to loan people money to exercise their options (and pay the tax?). But if Bolt forgives the loan, the IRS will consider it as income to the loan recipient.

But even then, I'd much rather have a (income tax marginal rate * loan amount) debt to pay than a (loan amount) one.

throwaway92394 650 days ago [-]
I'm more familiar with traditional retail options, but I'm confused.

I understand why the employees would want a loan - they need money to buy the shares required to exercise the loan - and I guess they can't do it through a normal broker?

If the employees Exercise-to-sell-to-cover or Exercise-to-sell they should be fine right because they would have closed the loan? This would explain why so many took the loan but so few of the layoffs were affected.

Is the only issue the ones that didn't Exercise-to-sell? I understand that tax will need to be paid but I'm not sure what benefit they'd have would be?

Unless, its because the capital gains + loan rate < income tax?

s1artibartfast 650 days ago [-]
Bolt isn't public so there is no sale option.

You have to pay to exercise, pay taxes, and pray for a sale option some future date.

JumpCrisscross 649 days ago [-]
> Bolt isn't public so there is no sale option

Private shares are actively traded. Bolt chose to restrict its employees from being able to sell.

throwaway92394 649 days ago [-]
Forgive me if this is a dumb question -

Assuming you're an employee with a relatively small number of shares (in terms of company control) - what's the point of shares if you can't sell them? Just _in case_ you can sell them later? Some type of dividend/profit sharing (which seems unlikely for a startup)?

s1artibartfast 649 days ago [-]
Yes, the main value is that maybe you can sell them someday.

This is why it is incredibly stupid that the IRS makes you pay taxes when you get them.

chris11 650 days ago [-]
It's short term capital gains vs long term.

If you don't exercise and just sell short term capital gains tax applies.

If you exercise ISOs and hold long enough you pay AMT, which can be refundable, and LTCG when you sell the shares.

throwaway92394 650 days ago [-]
What happens if they waive the loan? Does it count as LTCG + the income tax on the loan amount?
chris11 650 days ago [-]
I'm not sure what exactly would happen, but forgiven debt is usually taxable.
neetdeth 650 days ago [-]
> I'd much rather have a (income tax marginal rate * loan amount) debt to pay than a (loan amount) one.

Depends on your ability to pay. In some cases a large debt to a corporation is far preferable to a small debt with the IRS.

pbreit 650 days ago [-]
Why would employees exercise prior to departing and/or with no exit in sight?
s1artibartfast 650 days ago [-]
>Why would employees exercise prior to departing and/or with no exit in sight?

Mainly to avoid taxes if stock price goes up.

If the price is $1 today and you exercise the option to buy stock, you pay taxes on $1.

If the price goes up to $20, you pay taxes on $20.

If the company fails before you can sell, you loose moeny in both cases. However, if you wait, you payed a lot more taxes on stock that is worthless.

People can easily pay hundreds of thousands in taxes on stock that they can never sell. Also, sometimes the stock goes up so much that employees cant afford the tax bill to exercise the option, because the stock cannot be sold until IPO.

https://secfi.com/learn/exercise-stock-options-tax-implicati...

https://carta.com/blog/equity-101-exercising-and-taxes/

chris11 650 days ago [-]
It's last year, and an employee wants to change jobs. But tech is sky high, they are confident about the companies future, and want to get the tax benefits of exercising before they leave.

Or it's last year, and an employee wants to lock in the FMV for AMT before the next round/IPO.

It's definitely an aggressive move, but I can understand why someone would exercise.

ertemplin 650 days ago [-]
This depends on how much regular income the employee has, how much cash would be required to exercise the options and personal risk tolerance, but it could potentially be a way to avoid AMT tax (and instead pay long term capital gains tax) when the company eventually has an IPO or other exit and the employee decides to sell their equity.
bhouston 650 days ago [-]
I am not sure that is fair -- what if someone decided to buy out their vested shares with their own money? They would be screwed while those who borrowed from Bolt wouldn't be. It is just generally problematic.
bombcar 650 days ago [-]
Sometimes being nice ends up being unfair. Given the "talk to us we'll work something out" part of the message I bet that's what Bolt is basically doing - in the cases where people are now "screwed" they're going to arrange for a grant or something to make people whole.
sfblah 650 days ago [-]
Same problem with the student loan forgiveness being pushed in the US currently. My cynical take is that they’d just do the forgiveness and refuse to talk about the people in the situation you described.
whywhywhywhy 650 days ago [-]
Most of the attitude I’ve seen to that situation is “tough luck, life isn’t fair”… seemingly oblivious to their original argument for forgiveness being it’s unfair they’re saddled with that debt.
rootusrootus 650 days ago [-]
Politics is a numbers game, though, not a moral one. There are ~258M adults in the US. ~43M of them have student loans. Already you can see a problem. 17% is nowhere near a majority. If you are looking to make people happy and vote for you, targeting a 17% demographic is not an ideal strategy to begin with.

But some amount of the remaining 83% had student loans and paid them off. Comments on HN and Reddit notwithstanding, a non-trivial fraction of those will be put off by a decision to forgive current student loans.

Some other amount of people, probably a majority, never went to college to begin with. From their perspective, you just gave free money to a minority of people who were already privileged to begin with, by even being able to go to college at any price.

This is not how you win elections, and politicians primarily exist to win elections. It is entirely possible that forgiving student loans would result in a net-negative change in votes in the next election, and maybe for a while after that.

At the very least they need to fix the underlying problem before creating such a moral hazard, or the next round will be much bigger. If they really want to buy votes this way, it would probably be more effective to just give yet another stimulus -- a nice, big one -- to every voter in the country.

sokoloff 650 days ago [-]
There’s no shortage of single-ply thinking in the world of politics.
onlyrealcuzzo 650 days ago [-]
I am willing to bet no one did this.
gumby 650 days ago [-]
Procedurally: It's been fairly common at early stages of startups I've run but the amounts have always been so small (few thousand $) that it's not really commensurate. I also always put early exercise in the SOP (you can exercise immediately to start the LTCG period, and vesting just works in reverse: company can buy the shares back, and a fraction of that right lapses every month). This is part of the potential upside of working for an early stage startup.

I agree when it's 10s of thousands or more the optionality isn't worth it for almost anyone. And it's hard to imagine borrowing to exercise could ever be worth it.

I've never encouraged or discouraged any employee from making an exercise decision (I don't want to get the liability of giving tax or investment advice). I don't even encourage them to file 83(b) except that when I explain why it's a pain for the company if they don't do so, everyone has figured it out immediately :-).

fragmede 650 days ago [-]
Why not? Greed is universal and it's a chance to buy in for pennies on the dollar. We don't know their strike price or 409a or any of the other relevant details.
renewiltord 650 days ago [-]
Because the strike was high? Traditionally, it’s what you do at a startup if you’re early stage.
pevey 650 days ago [-]
But if they did that, it would set a precedent that is going to come back to bite them when they have to let the rest of the staff go eventually.
650 days ago [-]
bastawhiz 650 days ago [-]
Maybe someone can clarify this for me, because I'm not sure I understand how this is possible: when the loans were announced, it was said that ~half of employees took the loan. But here, when 200 people were laid off, only a "single digit" number of employees that were let go had these loans. Even if that number is 9, that's like 4.5% of the laid off employees.

How is that possible, except by Bolt explicitly not laying off employees with loans? I don't know if such a thing is illegal, but "you are indebted to us so we'll give you preferential treatment" doesn't feel _not_ illegal.

lbarrow 650 days ago [-]
This is pretty straightforward to explain without any nefarious things going on:

  * You don't need to take out a loan to exercise your options until you vest some options, which would typically take a least a year
  * Bolt grew really quickly and so had a high % of employees with low tenure
  * The layoffs disproportionally affected newer employees, which is extremely common and reasonable
If the people laid off were mostly people hired within the last year who had no reason to take out the loan yet, then you'd get a result like what we saw.

(All that said -- these loans are an absolutely terrible idea and I think offering them is irresponsible.)

czbond 650 days ago [-]
You need more facts - the loans may not be an even distribution across 50%; I expect loan support was skewed towards the upper part of the pyramid

Example - some staff may not have had loans/shares (eg; customer support, etc) and the loans may be for senior and up roles who have enough shares to worry about the high taxes on shares.

kaesar14 650 days ago [-]
I don’t understand though, the layoffs affected a third of the company and eng was involved, how could 33% of the workforce be laid off with over half taking loans lead to single digit people in this situation? Numbers don’t add up imo.
in_cahoots 650 days ago [-]
If the company was growing rapidly, then maybe 33% of the workforce hadn’t vested yet?
berberous 650 days ago [-]
Yeah, if they laid off new folks who started less than a year ago, none of those people would have vested. And in a rapidly growing company, the new hires can be a big portion of the company.
umeshunni 650 days ago [-]
And are typically the mostly likely to get laid off.
dehrmann 650 days ago [-]
> "you are indebted to us so we'll give you preferential treatment" doesn't feel _not_ illegal.

It's not on the list of protected classes in CA, and CA has at-will employment, so it's probably not illegal, but IANAL.

Also, as others have said, we're missing important information, but offering the loans was obviously sketchy and sets up a bad incentive structure.

achow 650 days ago [-]
Doesn't this from the article clarifies that?

Maybe the layoffs were mostly of newer, unvested employees.

devrand 650 days ago [-]
Did they have significant growth recently? It's possible they're laying off mostly newer employees who may not have even vested yet.
LatteLazy 650 days ago [-]
(Not) Owing the company money isn't a protected class. Also, presumably they laid off newer employees who were there for the loans?
burneraccountt 650 days ago [-]
Could be simpler: the half of employees number could have been a lie?
smol_pkg 650 days ago [-]
I remember interviewing with them about 2-3 years ago. Everyone seemed very enthused, but no one was able to clearly articulate for me what it was that made their product/offerings different.

Glad I dodged that bullet

Apocryphon 650 days ago [-]
Kind of a shame that yet another one of the few startups pushing for a four day work week turns out to be run by incompetents (Treehouse), and another founder who challenges the VC establishment turns out to be a two-faced charlatan (Basecamp).
aluva 650 days ago [-]
4 day week is simply a PR effort. I have been following the company on LinkedIn and even the current CEO put out "words of wisdom" and he likes them himself.. weird
planarhobbit 650 days ago [-]
Not to derail this thread but what’s two faced and charlatan about JF/DHH? Or are you referring to someone else?
Kindra 650 days ago [-]
Pretty sure this is referring to the situation last year: https://news.ycombinator.com/item?id=27000945
sillysaurusx 650 days ago [-]
Seconded. It’s surprising to hear Basecamp referred to in such a manner. Did something happen?
Apocryphon 650 days ago [-]
The whole brouhaha that led to a mass exodus. I don’t know the specifics, but to alienate such a substantial amount of a workforce after decades of pontificating on the proper way to build company culture shows that the wisdom they were hocking ain’t what it’s cracked up to be.
650 days ago [-]
nr2x 650 days ago [-]
ceo gives off Jim Jones vibes.
bogomipz 650 days ago [-]
Indeed. Someone linked this Forbes profile of him in a post yesterday:

https://www.forbes.com/sites/stevenbertoni/2022/04/04/meet-t...

rychco 650 days ago [-]
This looks like a parody straight out of the show Silicon Valley.
Doctor_Fegg 650 days ago [-]
Wow. This is priceless. A longform recap of the infamous Dave Morin interview.

> After sunset, he avoids electric lights and screens because they disrupt his sleep. Instead, he lights candles and plays a buffalo-skin drum (he made it himself with the help of a local indigenous tribe) to wind down before bed.

FireBeyond 650 days ago [-]
Hah, yes. Every so often I still read this for a laugh:

https://jesuschristsiliconvalley-blog.tumblr.com/post/465392...

But yeah, oh boy, this guy took Dave Morin and said "Him. He's my role model."

nr2x 650 days ago [-]
“That’s Ryan. He’s a Gen Z entrepreneur unsatisfied with the order of the world, and he wants to change it,”

Lolololololololololo

themanmaran 650 days ago [-]
Same here! I just looked back through my emails to see if it was the same "Bolt" I remembered.

I always imagined it being a much smaller startup, not an $11B valuation. And it seems the market has backed me up on that.

muh_gradle 650 days ago [-]
I interviewed for them 6 months ago. At the time I was super sad that I failed my system design interview, which is what killed my chances. But man oh man am I glad now.
SoftTalker 650 days ago [-]
Is it time to spin up http://fuckedcompany.com/ again?
a4isms 650 days ago [-]
Related: "Our Incredible Journey," which focuses on acquisitions that involve shutting the acquired company's products down and leaving their customers high and dry:

https://ourincrediblejourney.tumblr.com

curuinor 650 days ago [-]
daily wtf, which is stiiiill going, was also materially part of that sorta thing, but they were successfully paranoid enough not to get lawsuit threats until it wasn't worth it anymore like fuckedcompany was. so sidling into the thing worked the last turbomega tech crash
Gunnerhead 650 days ago [-]
No familiar with this. What was it about?
mgbmtl 650 days ago [-]
https://en.m.wikipedia.org/wiki/Fucked_Company

"a "dot-com dead pool" that chronicled troubled and failing companies in a unique and abrasive manner"

It was a nice counter-weigh to corporate PR-speak.

xeromal 649 days ago [-]
These guys don't actually post new content, but this reminds me of

https://ourincrediblejourney.tumblr.com/

randomhodler84 650 days ago [-]
Startup Dead Pool. Fantasy football except betting when the company will fail.
buggeryorkshire 649 days ago [-]
Ah I miss that, Pud was hilarious
lumost 650 days ago [-]
The tax benefits of options over RSUs are vastly overstated relative to the risks. At the end of the day, you're going to save ~15% on the total exercise through options compared to RSUs. That's 15% of what for many people may be a 5-10 year investment horizon.

The risk you take on as an employee with those options is much greater than 15%. If you have used loans to purchase the options, you have a substantial risk of being underwater.

It's time we callout options for what they are, a way for companies to protect their equity pool while being able to sell a story that the options are going to shoot through the moon.

renewiltord 650 days ago [-]
So you grant stock and that’s taxed at grant or you grant RSUs that convert at vest and are taxed at vest. But the stock is not liquid. How are you going to pay the tax. At least, with options you can just choose to sit on them. One of my friends walked away from an options grant and I exercised only when I wanted to. No tax implication till exercise. That’s a big advantage.

Early exercise is a big play. You do it if you’re super early and super confident. You don’t have to. Pretty traditional if you’re early enough since it’s cheap.

lumost 650 days ago [-]
RSUs are only taxed when the company is liquid, not when they are vested (which is one and the same post IPO).

So the tax free options are really just locking in long term cap gains. Of course the con is that it’s not actual compensation as the stroke will be equal to the present valuation.

sb8244 649 days ago [-]
The info I've seen for RSU indicates tax on vest, even if the stock is not liquid (private company).

Is it really true that tax is only if the asset is liquid? Does the IRS make a distinction between liquid and illiquid here?

ceras 649 days ago [-]
If they're issued as double-trigger RSUs then you're only taxed when they're liquid. That's because they aren't really yours till a liquidation event.
renewiltord 649 days ago [-]
You have to stay for the liquidation event, right? Even if you have a large amount positive there you're forced to remain at the job until the liquidity event.
lumost 649 days ago [-]
No, once the RSUs vest, they are yours at liquidation.
renewiltord 649 days ago [-]
But they won't vest, right? Here's what I mean:

- At year 0, you're granted 100 RSUs on a double trigger with a 1 yr cliff, monthly vest after

- At year 1, you have vested 0 but if the company went public you will immediately vest 25

- At year 4, with the company still private, you have vested 0 but if the company went public or had a liquidity event you will immediately vest 100

- At year 5, with the company still private, you are going to quit. If you vest now, you must pay tax, but no way to do that with cash unless company withholds RSU percentage

In the double trigger case, at year 5, you leave empty handed. In the single trigger, you pay tax with illiquid stock (through withhold or pay cash).

I've always only had options or stock, so do correct me if I'm wrong.

mech4bg 650 days ago [-]
That’s not true. It depends on the RSU structure. We’ve had both types at my company.

Also FWIW the company can withhold some shares as they vest but max 22% for federal.

scarface74 650 days ago [-]
You pay the tax by selling shares of the stock when they vest. It’s earned income like any other earned income. Some companies let you sell fractional shares to cover taxes.
renewiltord 649 days ago [-]
Who are you selling to? It's not public. Secondary markets aren't that prevalent.
scarface74 649 days ago [-]
I was responding to the part about RSUs. In hindsight, it is clear to me that the parent wasn’t talking about public companies. Are RSUs a thing in non public companies.
sb8244 649 days ago [-]
I have seen RSU granted at non public companies. But I think it was a one time thing when I saw it, after a private equity event occurred.
lumost 649 days ago [-]
RSUs are pretty common in successful private companies. Particularly once it’s possible to put a dollar value on the equity.
subsubzero 650 days ago [-]
Boy do I hate how ISO options are treated by the IRS for startup employees. It puts an insane amount of risk on the employee in both coming up with the cash to exercise(bolt offered loans for this part) and then the worst part, being taxed on unrealized gains. The latter to me seems completely against how the rest of the tax code when it comes to stock based assets. And it leaves employees who are not well informed on these tax details in a possible state of financial ruin should you have a stock valuation jump, then exercise; then stock price goes down, hello bankruptcy!. Its the prime reason I would never work for any startup again that offers ISOs.
bpodgursky 650 days ago [-]
- If you join as an early employee, your strike price is minimal and this isn't a concern at all

- If you want to minimize risk in return for higher taxes (call ~40%), just hold your ISOs and exercise-and-sell as a same-day sale when you're liquid (ie forgo the tax advantages of ISOs). There's absolutely no way for you to get screwed over if you're willing to take the gain as standard income.

paisawalla 650 days ago [-]
But if you actually want to have and hold equity in a company you helped build, and want the most favorable tax treatment, you have to

1. accept compensation in ISOs, likely taking a salary hit

2. exercise, and pay AMT in the exercise year on the spread

3. hold until you can sell, but at least for 12+ months so you qualify for LTCG treatment

So you get hit with a lower cash comp in (1) which is an opportunity cost. Then you have to pay taxes in (2) maybe well before the stock is ever liquid in any way. Then you still have to wait for liquidity (3).

Plus normally the company does not tell you, an ordinary employee, when its beginning fundraising. If it did, you could at least time your exercise so as to minimize spread.

Conversely if I want to take a bet on a public company which I have no relationship to, I just buy and hold. Why is it easier to get favorable treatment for a company I have nothing to do with, versus one that I helped build?

650 days ago [-]
rconti 650 days ago [-]
If you do your purchase and 89b election soon enough sure. But if the value has ramped up too much before you realize you should early exercise, you might (have) trigger(ed) AMT.
strikelaserclaw 650 days ago [-]
except in cases where you are let go or decide to leave.
JumpCrisscross 650 days ago [-]
> except in cases where you are let go or decide to leave

The IRS is only involved at the time of exercise [1][2]. Companies are the ones making ISOs expire, versus convert to NSOs, three months following termination of employment.

[1] https://thestartuplawblog.com/incentive-stock-options-post-t...

[2] https://www.cooleygo.com/isos-v-nsos-whats-the-difference/

s1artibartfast 650 days ago [-]
Sure, but nobody is complaining about taxes on penny options. They complain about a 100k tax bill for an asset that is not liquid and may never be worth anything.
mbesto 650 days ago [-]
> It puts an insane amount of risk on the employee

The market is what dictates this. You don't have to take a startup job.

Facebook, Google, etc. minted hundreds of millionaires when they IPO'd. It's hard for me to feel bad for people who take those risks.

I'd argue a whole lot of engineers should be much more judicious about joining startups and ask for more options. If engineers knew how to calculate startup risks better they'd probably know there is too much equity is concentrated to too few individuals (mainly founders).

subsubzero 650 days ago [-]
you pick two out of thousands! Google IPO'd so long ago that the rules regarding ISOs were different back then, strike prices could be arbitrarily lowered to whatever value the company wanted, not the maximum valuation as required by law now.

https://www.sec.gov/news/testimony/2006/ts090606cc.htm

scarface74 650 days ago [-]
And this “I’ll get rich!” statistical improbability is why thousand of employees are willing to work for less than their market value in exchange for Monopoly money. My former CTO who did have a lot to do with our former company having a 10x exit after I left (with very little equity that I didn’t exercise) tried to get me to work with him as a tech lead for what would have been a competitive local offer (mid 100s) - I work remotely - and “equity”. But couldn’t come near the base + RSUs at BigTech even with the recent 30% YTD drop.

They also have absolutely no idea how VC funding and the public markets for IPOs work during a bear market.

At least I can sell my RSUs for real money when they vest.

mbesto 649 days ago [-]
> And this “I’ll get rich!” statistical improbability is why thousand of employees are willing to work for less than their market value in exchange for Monopoly money.

And this is precisely my point. If less IC's believed this, it would put market pressure on startups to give them more options and better outcomes (including taxes).

scarface74 649 days ago [-]
The only “better option” I would accept is more cash - not Monopoly money.
mbesto 649 days ago [-]
Totally, but startups (literally?) do not have that option.
s1artibartfast 650 days ago [-]
The market has nothing at all to do with ISO tax policy.

As OP said, it is taxing unrealized gains. It makes as much sense as making employees pre-pay 10 years of income tax when they start a job.

bpicolo 650 days ago [-]
They ought to regulate how long employees have to purchase vested options after departure or termination. If you had a 10 year window regulated, wouldn't be an issue.

It would probably make good outcomes less good (companies would probably grant fewer options, or instead grant RSUs) but a much better mean?

dang 650 days ago [-]
Recent and related:

Bolt announces layoffs - https://news.ycombinator.com/item?id=31507599 - May 2022 (512 comments)

greatpostman 650 days ago [-]
What people don’t know is the CEO Ryan Breslinlow founded the company that constructed the loans. He played both sides.
icelancer 650 days ago [-]
People know this, it's being posted all over the Internet. However, while I think Bolt is a ridiculous company - and borderline scammy, check my comment history for my personal dealings with them - I really doubt that Ryan was in a position to seriously profit from these cashless loans.

I would guess Ryan set it up this way in compliance with IRS regulations and on advice of his internal attorneys and financial experts.

fundad 650 days ago [-]
Do they think they can get people to pay money back after terminating their employment?
jrochkind1 650 days ago [-]
"get" them to? I mean, by taking them to court and getting a court order for a bank levy or wage garnishment if needed, why not? If it's a legal debt, it's not really optional.
fundad 650 days ago [-]
Bolt’s investor’s legal team has entered the chat.
s_dev 650 days ago [-]
He's a founder -- NOT the CEO who is Maju Kuruvilla. Ryan might be CFO though so an executive.
mbesto 650 days ago [-]
His title says Chairmen. It's worse - he's ABOVE the CEO.
ldjkfkdsjnv 650 days ago [-]
He was the CEO for the majority of the time the company has been around
tempsy 650 days ago [-]
This is why you should early exercise and file an 83B election whenever possible.

Personally would avoid working at any startup that is in the awkward middle stage and would require you to shell out six figures just to exercise some questionable options especially now. Either join a very small company in the early stages where the valuation is still low or join a late stage or public company where you vest RSUs and don’t have to deal with options at all.

gkoberger 650 days ago [-]
Sure, but this isn't realistic. Like you said, most people can't afford to exercise early. Even at a small company, most people don't have an extra $10k to gamble on a startup that may go nowhere.

This is what Bolt was trying to solve. They did it the wrong way and hurt a lot of people, but they were trying to give people the opportunity to exercise early.

The correct answer is a 10-year extended window. It's not perfect, and there are downsides. But it's (currently) the fairest way to issue stock options to employees. By the time it comes time to exercise, the employee will be significantly de-risked because they'll know how the company is doing.

gwbas1c 650 days ago [-]
> The correct answer is a 10-year extended window

How would that work? Very few people stay in a tech job for 10 years. I stayed in a software job for 9 years, until I was laid off, and that's extremely unusual.

gkoberger 650 days ago [-]
Normally, the exercise window starts when you leave and lasts 90 days. The 10 years works the same way, except much longer! It has nothing to do with how long you're at the company (although some companies only trigger an extended window after you've hit X years).

Here's more: https://zachholman.com/posts/fuck-your-90-day-exercise-windo...

erichurkman 650 days ago [-]
Most startups offer a 90 day window to exercise after you leave. Some companies have extended that to longer (caveat being they convert to NSO grants after 90 days).
tempsy 650 days ago [-]
Define “most people”. $10k maybe a lot for a new grad but isn’t if you’ve worked even just a few years, especially in a high paying role in tech elsewhere.
dopamean 650 days ago [-]
I'm one of those "most people" right now.

I make a a great wage and have savings in the bank. However I have a 6 month old baby at home and a wife who is taking time off from her career to look after our baby. I also left a job I was at for almost 5 years and exercised my options on the way out. This cost me almost $30k in cash. At my new job early exercising would cost me nearly $40k. Spending $40k to early exercise this startup's equity grant feels like it might be a little irresponsible. It wouldn't surprise me at all if other people didn't have that much lying around.

tempsy 650 days ago [-]
These types of companies self select for people who are comfortable taking on more risk. If this is your thought process why would you even put yourself in a situation where you pick an offer from a company that offers options as part of your comp over RSUs or a public company?

I don’t doubt that many people have the same thought process, but if I decline to early exercise from a company that offers that option the alternative is a massive tax bill down the road that I didn’t need to pay if the company does remotely well.

dopamean 650 days ago [-]
I selected the company I'm at because they offered me the highest salary of all the places I was interviewing. They also have a product in domain I'm very familiar with and are a size that would allow me to have a big impact on the engineering org. Basically this opportunity checked all the boxes I set out to check when I decided to leave my last job.

I'll vest my options here without exercising and if they turn into something one day that'll be nice. In the meantime I'll collect the nice salary I negotiated for myself and grow my career the way I wanted.

Edit:

A little clarification about my last role. I took that job because they were using tech I wanted to learn and they had a team I wanted to work with. They also offered me salary that was a healthy bump from where I was at at the time. I didn't early exercise those options back then because I didn't know enough about the company to justify plunking down the cash. After being there nearly 5 years I believe in the company a lot and see the exercise as a smart investment. I don't have that clarity yet for my current role and so it just doesn't make sense to me to early exercise.

gkoberger 650 days ago [-]
If you're working at a small tech startup, you're likely not making a huge salary. Good, sure, but not huge. It's possible you left your high-paying FAANG job to be developer #3 at a tiny little startup, but in my experience this almost never happens.

Also, $10k is a lot of money. Even if you have it in savings (and I'd agree a lot of tech people technically do), it's a huge gamble on an unknown startup. You're already gambling your time; now you're supposed to also gamble your money?

tempsy 650 days ago [-]
if that’s truly how you feel why would you accept an offer where that’s how a significant percentage of your compensation works?

these types of work environments self select for people who are comfortable taking on risk. no one is forcing you or anyone else to join.

bradj 650 days ago [-]
People can have a variety of different comfort levels with different kinds of risk. You’re suggesting that someone should consider a slightly lower salary + future possible earnings on options as equivalent to slightly lower salary + future possible earning on options - risk of loss on early exercise. Some people work for startups, some are angel investors, there is some overlap but it’s not 1:1 and it’s because those are different types of risk.
s1artibartfast 650 days ago [-]
The point is that it sucks and is largely avoidable.

Sure people can not work at companies that don't provide 10 year exercise options. Its not like they are slaves.

But that doesn't mean there aren't better ways of structuring options and it is bad to point this out.

dehrmann 650 days ago [-]
The gotcha with exercising early is you have less information about an illiquid asset. The longer you can wait, the more time you have to see if the company will succeed.
tempsy 650 days ago [-]
if you leave the company you get a refund for whatever it is you don’t vest.

i feel like people who are acting like early exercise is money down a black hole aren’t aware that if the company is going nowhere you will probably know that long before 4 years, in which case if you leave you get a refund for unvested options. and even if you’ve vested shares you’re unsure about in many cases the company will offer to buyback shares.

worst case it’s a write off against capital gains.

tomatowurst 650 days ago [-]
This type of gross negligence and incompetence from Ryan really makes me doubt his twitter claims about YC, Sequoia and NYT.

It's starting to make sense that he did to shift the blame and deflect.

Having said that I don't think this is going to play out well for him. It was a huge mistake to get half of your staff to take on personal debt for stock options that mount to nothing.

ldjkfkdsjnv 650 days ago [-]
Yeah the picture is getting clearer. When he made those posts, bolt was failing and he knew it. Those were frustrations coming out. He got pushed out and then not long after the layoffs begin.
anonymouse_001 650 days ago [-]
Regular user posting anonymously.

But I thought I'd give an example of how what Bolt did made sense in some rare cases, and is also extremely dangerous in almost all cases

I worked for 4 years as a Staff Engineer for a company that went public beyond my wildest dreams. I have worked for startups over 20 years and this was the first time it paid off for me.

I had a mix of RSUs and ISOs. The value of those when the company went public (shortly before I became fully vested) was over 2.5 million. All in all, I made about 3 million dollars (I stayed an additional 6 month and left once I hit 4 years).

Taxes ate a huge portion (left with 1.8 Million after taxes). Had I early exercised the ISOs, I would have conceivably paid about 700K less in taxes (if I had early exercised and pain 200K or so in taxes)

So something similar to the option that Bolt provided would have given me 500-700K additional.

Sounds good, right?

However, keep in mind most startups fail, and very few do as well as the one I was in did (I've worked for ~6 companies over the course of my career). The first one struck big, but I didn't sell (I could have made 100K after taxes when I was very young) and then the first dot com crash happened and that was that.

And then this one.

Let's look at what would have happened had I had an option like Bolt gave employees and the company had not gone public or worse, got laid off. I would have owed over 200K on a loan taken against stock that was now worthless.

So the pragmatist in me things that making an extra 750K on the 1/10 chances that the company IPO'ed and did well, vs a 9/10 chance that I would owe 200K.

Now, keep in mind I worked with people who were on their 2nd, 3rd successful startup and could afford to pay 200K in taxes on stock that might never pan out. The risk for them was "that sucks!". The risk for me would have been bankruptcy.

If you cannot afford to early exercise and take the tax hit if it does not pan out, you definitely, definitely cannot afford to take out a loan to early exercise your stock.

w0de0 650 days ago [-]
This isn’t a competent news article. I’m not commenting on Bolt Financial’s unethical choices, but simply on the poor, slightly insulting Axios style and format.

Particularly egregious is the line which begins “Yes, it's welcome news…” You are ostensibly the news, Axios - why are you telling me how to feel about yourself? Axios repeats this pattern frequently - their signature bulleted snippets of supposed fact often being little more than tweets.

Also they carry obsequiously friendly reporting on Amazon frequently.

csours 650 days ago [-]
My understanding is that stock grants to employees are no longer tax advantaged and that's one reason they went away. I don't have a deep understanding here, so if someone has a link to when this changed, I'd appreciate it.

Was this mechanism intended to get around this tax problem and at the same time help out the company?

ilamont 650 days ago [-]
Bolt Financial yesterday laid off one-third of its workforce, just months after raising $355 million in VC funding at nearly an $11 billion valuation.

Serious question: Does this company have a future? Does it have any value, either as a profit-generating venture or sold to an acquiring company?

650 days ago [-]
sydthrowaway 650 days ago [-]
I don't get the value of this company. How can fellow SWEs who learnt about kernels, networks and hardware (among other incredibly complicated works) get excited about ONE CLICK CHECKOUT?

Maybe this is the JS boot camp effect.

rubiquity 650 days ago [-]
I'm in no way defending Bolt, but your comment exudes snobbery as well as ignorance about what should drive a company's valuation. There are many incredible software engineers that care far more about the problem at hand being solved than whether the technical solution strokes their intellectual ego or not. This type of punching down at other software developers really isn't good.
hotpotamus 650 days ago [-]
How did an office sub-leasing company (Wework) become a tech company that was supposed to change they way we live and work and create the first trillionaire, or whatever craziness they cooked up?

From what I've seen, you find a charismatic dude with a good story that they probably even believe themselves, and another dude with a lot of money who wants to make that into even more money and you get them together. Then you find more believers.

It's more akin to religion than anything else, but employment seems like the new religion for many - it's certainly an integral part of identity.

8ytecoder 650 days ago [-]
How did a home rental company or a media rental company become a tech company?
actusual 650 days ago [-]
I'm confused about what you are trying to imply with your question.

Either you are making an argument for "Netflix/AirBnB are considered tech companies, so why not WeWork?". Or you are saying that Netflix/AirBnB aren't actually tech companies? Or are you implying that given enough time, WeWork would have become a tech company, despite its non-technical beginnings?

To compare AirBnB/Netflix to WeWork from a technology standpoint doesn't make any sense IMO.

icelancer 650 days ago [-]
>> How can fellow SWEs who learnt about kernels, networks and hardware (among other incredibly complicated works) get excited about ONE CLICK CHECKOUT?

I'd be willing to bet like 80-90% of SWEs are just people who write code 9-5, have little passion for the job, and just collect paychecks like most people in America. HN and Slashdot and so forth provide a very skewed view on our profession.

So when Bolt offers people over-market wages for skills writing JS/PHP and some basic database stuff... a four day work week... strong culture of "doing enough" (aka Fried's mantra at Basecamp), why not take it? It's just a job to them.

Apocryphon 650 days ago [-]
I had a former coworker who has a doctorate in physics with an emphasis in nuclear engineering, then a masters in CS. She ended up coding Rails at a startup because it paid better. The market demands its CRUD.
walleeee 650 days ago [-]
hopefully the dip we're toppling into will do a number on this kind of incentive
FollowingTheDao 650 days ago [-]
What you are experiencing is the cognitive dissonance upon realizing that the last 14 years was nothing but a financial mirage.

It is all unraveling now. No one was excited about "one click checkout". They were excited about the ROI.

pevey 650 days ago [-]
And it's a one-click checkout that they apparently don't event WANT to be widely adopted. There is no pricing info on their web site. It is a "call us" type of sales pipeline. I pointed this out in another thread yesterday, and some people responded that this is fine because it is geared toward enterprise. But it's really not fine. It turns a lot of companies away, even somewhat large one. And the nature of the product is that they want network effects. They want it to be widely adopted. Trying to do that from the largest companies down was a poor strategy. The early adopters will be the mid-size companies with involved owner willing to try something new. Then the enterprise sheep and time-crunched small businesses will follow, after they see others using it. But a meaningful portion of mid-sized companies who are interested get lost in the very first step of the funnel, when they get to the site and can't find even basic information about how much it would cost.

Compare this to Stripe (which I currently use at 2 different companies in 2 different industries) which manages to be very transparent about all pricing and still have an enterprise sales channel that can make larger deals with discounts.

ceejayoz 650 days ago [-]
I do; I've found the reduced friction of Apple Pay and Shopify's ShopPay offerings to be very, very nice from a user perspective.

What I don't get is thinking it's so massively compelling as a competitor to these existing systems.

axg11 650 days ago [-]
Then you probably don’t understand the value of any big tech company? All of them are premised on ideas that are trivial on the surface but involve difficult engineering challenges at scale.
TuringNYC 650 days ago [-]
Checkout is a problem that requires low latency, high reliability, and difficult decisions about fraud to be decided at the moment. These are hard problems which are interesting to many engineers.

It is also a high-value problem, and thus there is compensation to support the hard work.

_fat_santa 650 days ago [-]
Engineering vs Product. You can have very exciting engineering behind what is otherwise a very boring product. I'm currently leading a React Native app team and from an engineering perspective, it's very exciting. Bleeding edge everything, fabric, hermes, beta and alpha versions of multiple devtools, etc. From a product perspective it could not be more boring, we're building an app to help insurance salespeople track their sales.

And of course there's always the money, for the right price I'll work on whatever you want me too. If someone offered me a job building Windows Vista widgets for $1M/yr, you can bet I will take the job and be very happy.

shalltell 650 days ago [-]
How can you not get excited or at least, curiously so, to see how they solve this "problem"?

How is bolt going to be better or different than PayPal checkout or the amazing Apple Pay checkout (I literally use Safari for this).

PayPal checkout kinda sucks (the UX was bad when I used it years ago, not sure how its improved). Apple Pay is way better on UX, but can only be used in specific cases.

Simplifying something complex that the user uses as a one-click can/is exciting. I don't think Bolt is the solution though.

bpicolo 650 days ago [-]
There are a lot of product-minded engineers out there (user-facing outcomes focused). There are also a lot of engineers who enjoy the engineering decisions and challenges at particular stages of a company's growth. Both (and many others) are good and healthy mindsets.

You don't have to be a kernel hacker to be a good or motivated engineer.

dntrkv 650 days ago [-]
Of all the services to complain about, one-click checkout should be near the bottom of the list.

For the users, it provides a great UX and prevents the need to give your personal/CC info to every random site that you wish to purchase from.

For the business, it can significantly improve conversion, reduce fraud, and reduce eng time for payment integration.

eatonphil 650 days ago [-]
See also: the HN comment about Dropbox.
scarface74 650 days ago [-]
And Jobs ended up being right. Dropbox is a feature not a product. I can get a lot more by spending $99 on O365 + 6Tb of space on OneDrive than I can spending $99 for 2TB on Dropbox.
aluva 650 days ago [-]
There is some truth to this, not the job for everyone. I personally know the current CEO and I was surprised when he joined the company as CTO. As far as I know CTO at the very least should be familiar with latest and greatest technology.
pjc50 650 days ago [-]
That was the original Amazon "one click" patent!

It's not the fellow SWEs that care, it's the observation that every step removed from the checkout flow increases conversions and therefore revenue.

notesinthefield 650 days ago [-]
Id be thrilled about the bootcamp scene if Bolt were a direct result of it. But I doubt many are excited any more than motivated to do better.
automatic6131 650 days ago [-]
I was just about to make this point. How does "one click checkout" become worth $11B?

(massive) Capital misallocation, i'd imagine

jakelazaroff 650 days ago [-]
According to a comment on another thread [1], their annual revenue is $40M. That's a valuation of 275x revenue. And they were seeking to raise another $400M at a $14B valuation [2] — 350x annual revenue! Truly mind boggling.

[1] https://news.ycombinator.com/item?id=31510453

[2] https://www.theinformation.com/articles/bolt-seeks-valuation...

seibelj 650 days ago [-]
I also wonder if that revenue is just the payments they process. If so then true revenue is probably ~2.5% of that.
jakelazaroff 650 days ago [-]
As shady as this company is, I would honestly be shocked if they counted the full value of the payment processed as revenue.
650 days ago [-]
dghlsakjg 650 days ago [-]
Also isn’t this in somewhat direct competition with Apple Pay, Google Pay, Amazon Pay and Stripe?

I would not want to bet against any one of those companies, let alone ALL of them.

icelancer 650 days ago [-]
Correct, and you didn't even name their toughest competitor - Shopify's one-click checkout.
dghlsakjg 650 days ago [-]
Isn't shopify one-click limited to stores on their platform?
Invictus0 650 days ago [-]
To be clear, your question is asking why smart people get excited about simple things that provide a lot of value?
scarface74 650 days ago [-]
You mean why would developers actually care about solving business problems?
rwhitman 650 days ago [-]
I feel like this saga is going to conclude with a Hulu/Netflix/HBO documentary where they end the series with an interview of Ryan Breslow in his jail cell.
hestefisk 650 days ago [-]
So the firm borrowed money to employees?
madamelic 650 days ago [-]
My understanding is that Bolt lined up loans for employees to cover employees' tax burdens due to exercising their options.

In simpler words: Bolt helped employees take out personally guaranteed loans to give Bolt money.

In the loan terms, if the employee leaves for any reason, the employee owes Bolt the entire loan amount within 90 days of end of employment.

gruez 650 days ago [-]
> to cover employees' tax burdens due to exercising their options.

Not just the tax burdens, the exercise price as well

yardstick 650 days ago [-]
> Not just the tax burdens, the exercise price as well

Sure, but the exercise price is effectively set by the taxman. If you set it too low, they’ll just charge more tax.

See https://assets.fenwick.com/legacy/FenwickDocuments/409_Valua...

“Employees, officers, directors and consultants who receive stock options with exercise prices that cannot be shown to be at or above the reasonably-determined FMV on the date of grant face immediate tax on vesting at a combined federal and state tax rate as high as 85% or more.”

The game is rigged in the taxman’s favour.

If the tax was calculated at the exercise (or grant!) date but only due upon sale of the shares (or using those shares as collateral to loans etc), the system would be a lot fairer. Especially for illiquid shares in private companies, where it may be years until you could receive cold hard cash for your shares.

gitfan86 650 days ago [-]
The alternative these people had was to not exercise their shares. Do we know when those shares expired? Could they have waited until an exit to buy the options?
hoofhearted 650 days ago [-]
Doesn’t all this smell ENRON’ish?
gruez 650 days ago [-]
In what sense? Searching Enron's Wikipedia article I couldn't find any references to employees getting loans to buy stock. The only way they're similar is "dubious company crashes and burns, employee's equity turn worthless", but even then the similarity is limited because Enron was a case of fraud and bolt isn't (at least to my knowledge).
fnordpiglet 650 days ago [-]
Enron, Lehman, and similar had serious pressure to buy company stocks including making it the default for a 401k contribution. But afaik there was no equity financing by the company. That said the culture was so heavy all in corporate stock many, many employees lost everything.

Never hold company stock. If you work there you’re already incredibly long. Diversify.

solatic 650 days ago [-]
A rather large number of Enron deals (where Enron purchased an asset) were denominated in Enron stock rather than in cash. Enron executives were compensated in stock, with additional bonuses based on the stock value. Everyone was happy until the stock started to dive, then many of the underlying deals that were denominated in stock reverted to cash because the stock price dropped too low, etc.

It's Enron-ish because it's a deal that creates additional demand for the stock, then when the price of the stock rises, it's used as proof that doing deals with company stock is profitable to all parties, which makes it more enticing in the future. When the stock falls (always unthinkable), the rank and file are holding the bag.

hoofhearted 650 days ago [-]
I was implying ENRON’ish in the sense of executives encouraging employees to take huge risks on over inflated sales numbers and the employees being left to hold the bag. Not in the sense of shell companies and widespread corporate corruption.
Apocryphon 650 days ago [-]
It’s less Enron and more like the financialization of everything. Companies have so much capital they start investing in other startups or try our harebrained schemes like this, rather than spending it on R&D.
Allower 650 days ago [-]
xwdv 650 days ago [-]
Imagine if getting fired and immediately owing a vast sum of money to your employer became a common practice at most companies. Might lead the way to higher levels of employee retention and may be seen as some kind of solution to people not doing their jobs or doing the bare minimum just for a paycheck, especially in undesirable but necessary jobs.
FollowingTheDao 650 days ago [-]
What you are describing is indentured servitude. And might I add that it is scary you even think this is close to a good idea.
xwdv 650 days ago [-]
I’m merely analyzing ideas. You’d probably turn blanch if you attended some of the product development meetings that happen behind closed doors at my employer.
fnordpiglet 650 days ago [-]
Sounds like precisely the opposite world I want to live in.
floren 650 days ago [-]
It's disgusting as hell so yes, I wouldn't be surprised to see it in the next few years. Maybe when you start your new job, you have to pay them a $10k deposit, which will "vest" back to you over the next four years; quit early and it's gone!
umeshunni 650 days ago [-]
This is/was actually a common practice in IT companies in India, where you have to a pay back a 'bond' if you leave within a year or something.
fundad 650 days ago [-]
Imagine getting paid back by someone you just terminated. It's fantasy, fuck these guys.

Seriously pay nothing back until you speak to a lawyer. Bolt will be out of business by the time the loans go into collection, then offer to settle for $1.

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