Stripe RSU Situation
If you are an employee at Stripe, there’s no doubt you may be concerned about your soon-to-be expiring RSUs. Here’s the scenario and what you can do about it.
There are millions of dollars of employee Stripe RSUs that will start expiring in 2024. They risk forfeiture unless the company changes the terms of the awards, buys the awards, or has a liquidity event (e.g. an IPO). Unfortunately, the IPO market is essentially shuttered at the moment, which leaves the other two options.
If Stripe extends the RSU expiration date, this would be a “deemed event” by the IRS that creates tax withholding issues. Stripe employees will face a personal tax liability when there is a “deemed event” or when the Stripe RSUs vest.
However, at the moment employees cannot sell any of the RSUs to pay their tax bill because the company is still private. Stripe raised $6.5 billion dollars to pay the employees’ tax bills and buy any shares that the employees would like to sell.
What Should Stripe Employees Do?
Given the situation, Stripe will change the terms of the RSUs and this will be a taxable event. As an employee, the company will pay the withholding taxes on your behalf. There’s no individual action required on your part.
The more important question is – the company is offering to buy your shares, so should you sell right now?
Like all things related to money, that depends on your financial situation. You should take a few things into consideration. For example, do you need cash in the near term for something – a home, student loan paydown, or another large cash outlay? If yes, selling shares could be a good decision for you.
Furthermore, how on track are you with your current financial goals? If selling some Stripe RSUs helps you get focused on your financial objectives, this could be a great idea.
Stripe Ownership Considerations
The first step is to review your Stripe RSU grant document. It has a lot of important and helpful information.
When thinking about your Stripe ownership, how much do you stand to gain if you sell your shares back to the company? Do you think that the shares will be worth more in the future? Is there an IPO on the horizon once the equity markets are more accommodating? These considerations take into account the current state of the business and its future possibilities.
The future outcomes are highly unpredictable. Keep in mind that the shares could be worth 3x their current value in the time ahead. On the other hand, they could be worth only ¼x of their current value in the coming years.
What will your tax implications be now versus if you wait until the future to sell? If you have a windfall from a future IPO, you will most likely have a wonderfully lucrative year combined with your worst tax year ever. Have you carefully considered what your taxes will be today compared to what they could be in the future?
Clearly, there are many considerations to take into account regarding your Stripe RSUs. If you are concerned and would like to chat with a qualified professional about RSUs or any other financial planning matters, you can set up a free consultation.