How Can I Effectively Exit a Company After IPO?
I am considering a role at Stripe. The stock offer looks great, but I'm worried that they might IPO and the stock might drop rapidly.
Is the main solution just to quit immediately after IPO time? Is there something better I could do to de-risk myself financially?
Discussion
(7 comments)- 4
6 months agoEngineer @ RobinhoodStripe offers 1 year grants so the risk resets every year. However, if the Stripe IPO is successful and the share price is much higher than the price you started at, you will only reap the benefits for 1 year.
- 3
6 months agoTech Lead @ Robinhood, Meta, Course HeroIf a company IPOs, your default operating mode should be to stay, not leave. This is because being one of the "pre-IPO folks" carries a lot of weight if the company goes on to be successful (this was the case at Meta). Having that tenure is extremely helpful in fostering trust and getting promoted, especially to Staff+, as I talk about in my promotion course here: https://www.jointaro.com/course/nail-your-promotion-as-a-software-engineer/you-cant-job-hop-to-success/
- 36 months agoEng @ Taro
I worked at a company that had an IPO, and we had a 6-month lockup period where we couldn't sell our shares. I imagine there may be a similar case with Stripe, so you wouldn't be able to sell your shares immediately after Stripe IPOs.
There are two schools of thought about how to treat your shares once you can sell them:
- You can treat your shares like cash and sell them immediately.
- You can hold on to your shares and reap the significant financial benefits if the company continues to grow.
Option 1 is one way to derisk yourself because you can sell your financial concentration in one company and use that cash to diversify into different companies. The con is that you end up eliminating your upside if a company does well. A common question people ask themselves is: "Would you invest in the company if you had cash reserves lying around?"
Option 2 is the riskier approach, but it can come with significantly more upside if the company does well. The concentration into a single company is how people can become very wealthy.
I would try to think about companies in a long time horizon, say 5-10 years when you make your decision. It can be easy to be reactive when you see short term fluctuations with the share price. Here are some other questions that you have to ask yourself:
- Do you need the cash now? Maybe you need a down payment for a house.
- Do you see any reason why Stripe would/wouldn't succeed? How much conviction do you have?
- Does the company have a moat where competitors will have difficulty competing with them?
- How sticky is the product? How much effort is required for a company to move from Stripe to a competitor?
- 2
6 months agoStaff Eng @ Google, Ex-Meta SWE, Ex-Amazon SDM/SDEAre you being offered private RSUs that would convert to public RSUs (and vested private shares convert to public)? Or options? What is the valuation they are using when determining a dollar amount value of the offered shares?
You can’t guess how the market will react. Normally non-public you treat the stock as a bet, not your primary compensation.
Would you accept the offer if the stock was worth 50% of the number they presented?
It is really a risk tolerance question. I don’t get how it would be helpful to quit near the IPO?
- 06 months agoSenior Software Engineer [OP]Upstart
I'll try to get those data points, thanks for pointing them out. The 50% mental model makes loads of sense. I rephrased the post to say "quit immediately after IPO" instead of "near IPO." The idea would be leave before the stock can crash further to mitigate downside risk.
- 16 months agoStaff Eng @ Google, Ex-Meta SWE, Ex-Amazon SDM/SDE
Oh, the leaving is “any stock after this may be worth substantially less, so my total compensation will go down, so I should get a job elsewhere with what I perceive to be more stable stock price”. I guess that’s an approach?
Taking the offer seems like an opportunity cost thing, mainly. You’re going to have some of your comp tied up in private shares with risk to the value when they do convert to public shares. All of that is outside of your control, but would you feel much safer having public shares of a potentially less volatile company?
Alex mentions below that being a Pre-IPO person may lead to faster growth, which then may lead to higher total comp, which may mean larger stock grants. If the stock did crash, your future grants would have a planning price lower, so you get more shares, so then upside if the stock recovers is higher. Of course all of this is speculative and it is going to boil down to if you think locking up some percent of your comp in volatile, non-public shares is a good bet.
- 16 months agoTech Lead/Manager at Meta, Pinterest, Kosei
Not really answering your question, but I am very bullish on Stripe :) I don't know the exact value of the IPO, but I am very sure there is fundamental value in the company, so the stock won't go down by a huge amount.
I think $50B+ valuation is safe, especially as the economy recovers.
