Depending on how you look at it. This is good for employees who dont have to wait till the cliff. But on the other hand, if your RSUs are based on a fixed amount (which I believe is the case for all the new hires in DD) and not no of units, then you're missing out on stock growth. Since the compensation is capping the upside of stock.
Overall, this is not bad for a company that has already IPOed. I hope the startups that are on the verge of the IPO dont use this as a way to cap out giving RSUs to employees.
> if your RSUs are based on a fixed amount (which I believe is the case for all the new hires in DD) and not no of units
That's quite surprising. Generally RSU comp is based on a particular monetary amount, but converted to no. of units upon issuance based on market prices (usually at/close to start date). Is this not the case with DoorDash?
If that's the case that seems... awful? That's a cash bonus with a downside.
What I've seen is generally the conversion happens once for the whole package, when you sign. So if the stock grows during your vesting period, the value increases (goes both way obviously).
I think here they are mentioning value based, which means that instead of being given X amount of shares/rsu over 4 years, you're given "the equivalent of $X" at the begining of each years. So after 1 year, of the stock doubled in price, you will effectively receive half the amount of stocks (still the same $ value tho).
That's typical, but I've heard of a move away from it, to a plan where you get a set dollar amount every month(?) and it's converted to employee shares at the market rate then. Sounds like DoorDash just moved to it, and someone has linked a Blind thread where apparently Stripe/Instacart have, and I heard from a friend that Lyft just moved to that as well.
I can see the importance of this from the company end - with tech company shares skyrocketing, a fixed share amount gives them potentially unlimited stock compensation liabilities which could drag on earnings. But from an employee perspective, it sucks. You get none of the upside of company stock appreciation but all of the downside of being forced to purchase company stock with a portion of your compensation. You're much better off taking higher cash compensation and using that to purchase the stock of hot tech companies on the open market.
> I can see the importance of this from the company end - with tech company shares skyrocketing, a fixed share amount gives them potentially unlimited stock compensation liabilities which could drag on earnings.
AFAIK that is not how stock works in this context. The company issues the shares ex nihilo. That dilutes existing shareholders (if not offset with buybacks) but otherwise doesn't cost the company anything. The shares are not vested so if you leave they return to the comp pool. The company doesn't magically issue new shares on your vesting date so any rise in share price doesn't affect the company anyway. The whole point from a company POV is they can pay you in paper (shares) they manufactured out of nothing rather than cash.
They are doing it this way to reduce the total number of shares they need to issue (aka cut compensation). There is basically no upside for an employee, the changes to vesting schedules or cliff are a sop to avoid having to tell their employees that they're cutting compensation. Employees can already borrow against those RSUs if they need money.
The idea that missing out on a 10%-200% rise in the share price over the next four years in exchange for a bit more flexibility in vesting is a joke. If the company actually cared about the flexibility they could just switch to 6 month vesting or monthly vesting without removing the upside. There is no benefit to removing the upside beyond reducing dilution. They sure as hell aren't going to apply that same policy to their executives.
Agreed, this seems deeply negative for the employee. It's not semantically different than just being paid a cash bonus, except you are forced to buy company stock with said cash bonus.
Which I suppose you can just immediately sell and get back the cash - which begs the question of why not just model this as cash bonus compensation entirely?
The entire attraction of equity is that it can appreciate as it vests - that your (presumed) contribution to the company's market cap during your tenure is rewarded.
If I was looking at offers I would just not accept this nonsense. Not only are you compensating employees less, you remove the feeling of shared ownership that comes with stock grants, which is a powerful motivator.
yes, have been lucky enough to exit 2 IPOs including DD. When there are hockey stick growths during pre-IPOs, you miss out on a lot of $$ on the table.
Overall, this is not bad for a company that has already IPOed. I hope the startups that are on the verge of the IPO dont use this as a way to cap out giving RSUs to employees.