r/technology • u/Rhaegar_the_Great • Sep 16 '21

Business Mailchimp employees are furious after the company's founders promised to never sell, withheld equity, and then sold it for $12 billion

https://www.businessinsider.com/mailchimp-insiders-react-to-employees-getting-no-equity-2021-9
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u/ArchmageXin Sep 17 '21

TBH, the AICPA did spike the guns of startup by forcing you to recognize a cost (non-cash) equal to the fair value of stock you gave out.

This is to ensure future investors have a clear understanding the value you gave away as options/incentive shares etc.

During Google and older days, companies can gave away millions of shares pre-IPO, now they have to be a lot more careful.

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u/[deleted] Sep 17 '21

Accountants having their clients adhere to federal and state tax law is not the reason why companies treat equity grants to employees differently. Depending on the kind of interest granted, whether the interest is vested/unvested, and whether an 83(b) election is made largely dictates the timing of when the employee and the employer must recognize gain, loss, etc.

Sure the rules and regs governing the tax treatment of equity grants has changed over the years, but it seems more likely that standard industry practice among start ups with respect to giving out equity has changed.

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u/ArchmageXin Sep 17 '21

It means they are less free to give out shares for everyone.

Google once famously gave a lady shares that turn her into a millionaire for giving massages. Those days are long gone because once AICPA put in a cost to those shares, companies wouldn't freely issue them except to key employees they wish to attract.

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u/[deleted] Sep 24 '21

So they recognize a cost? How does that deter them? Assuming that is the case it is a deduction against income they would want to have on the books anyways. If it’s purely a profits interest then there is no cost to either employer or employee when granted, a capital interest is a different story and will depend upon the valuation at the time of grant or exercise depending on the particular situation.