Uber's attracted a lot of attention over how it issues stock, because as the largest private unicorn, there are billions of dollars of wealth currently locked up in illiquid stock held by employees who would prefer to sell it.
With all this pressure building up in the kettle, it spills over from time to time into lawsuits like this one.
It's worth remembering that starting in 2013, Uber started blocking secondary stock sales and sometime in 2015 shifted from issuing options to RSUs. This had two effects beneficial to Uber: it created golden handcuffs for early employees, and prevented Uber from being subject to SEC disclosure requirements as the number of shareholders expanded.
Uber's practices on stock options are fairly unique in several aspects:
* a 30-day exercise window if you leave (even shorter than the much-disliked 90-day windows!)
* restricted "trading windows" where employees can only exercise options during four or five months of the year. Mixed with a short exercise window, this can be poisonous, imagine if you left the company and couldn't exercise your options before you left. This happened to a friend of mine at a now-public company; he lost about a hundred and thirty thousand dollars.
* the ability to early exercise stock (eg, before it has vested), starting six months into an employee's tenure.
Uber's main counterargument is that the plaintiff is a sophisticated individual (Stanford Law grad, experienced engineer), and he should have been aware that early exercising more than $100,0000 worth of ISO-type stock options converted them to NSOs.
This is probably true, but if an engineer with a law degree screwed this up, imagine what's happening to everyone else.
> Uber's main counterargument is that the plaintiff is a sophisticated individual (Stanford Law grad, experienced engineer), and he should have been aware that early exercising more than $100,0000 worth of ISO-type stock options converted them to NSOs.
It's more confusing than that. If your equity is valued at more than $100,000, if you exercise even one share early, the entire grant above $100,000 converts to NSOs.
This is a really, really easy point to trip up on.
> Can you elaborate on this? I'm about to exercise my first options before the end of the year.
These limits are set by the IRS[0]. As I understand it, if you're exercising vested options, you're fine as long as the value of the amount you exercise doesn't exceed $100,000. If you're early-exercising, though, your entire grant counts towards the total, because the IRS considers that all "early-exercise-able", even if you're only early-exercising one share.
However, I'm not a lawyer or an accountant, and this isn't legal or tax advice, so you should definitely seek advice from a tax attorney regarding this topic.
> imagine if you left the company and couldn't exercise your options before you left
As I understand it, once you leave the company, you're no longer subject to restricted trading windows. So you should be able to exercise thereafter without restrictions.
With all this pressure building up in the kettle, it spills over from time to time into lawsuits like this one.
It's worth remembering that starting in 2013, Uber started blocking secondary stock sales and sometime in 2015 shifted from issuing options to RSUs. This had two effects beneficial to Uber: it created golden handcuffs for early employees, and prevented Uber from being subject to SEC disclosure requirements as the number of shareholders expanded.
Uber's practices on stock options are fairly unique in several aspects:
* a 30-day exercise window if you leave (even shorter than the much-disliked 90-day windows!)
* restricted "trading windows" where employees can only exercise options during four or five months of the year. Mixed with a short exercise window, this can be poisonous, imagine if you left the company and couldn't exercise your options before you left. This happened to a friend of mine at a now-public company; he lost about a hundred and thirty thousand dollars.
* the ability to early exercise stock (eg, before it has vested), starting six months into an employee's tenure.
Uber's main counterargument is that the plaintiff is a sophisticated individual (Stanford Law grad, experienced engineer), and he should have been aware that early exercising more than $100,0000 worth of ISO-type stock options converted them to NSOs.
This is probably true, but if an engineer with a law degree screwed this up, imagine what's happening to everyone else.