In any startup that offers stock shares in addition to base salaries, there’s always the promise of the company going public, and employees getting rich quick lingering in the air. It’s what most tech employees hope for when they enter the startup environment.
But what happens if that company never ends up going public? What happens to the employees’ shares in the company?
For most companies that don’t wind up filing for an IPO, employees are stuck in a sort of limbo. Today, more tech companies are waiting longer to officially jump into the public pool. Uber is included in this list of companies hesitating before moving forward. Uber employees were stuck with large sums of stocks until a recent loophole was discovered, according to Bloomberg.
It turns out that employees who have been working for Uber for a minimum of four years have the allowance to sell as much as 10 percent of their shares. While this sounds like a sweet deal, there are only about 200 out of the 10,000 Uber employees that have worked at the company for the required amount of time to cash out.
As of June this past year, Uber’s balance sheet was at $11 billion, but its total valuation is at $69 billion. To keep the company from going broke from these payouts, Uber caps the buybacks well below the $10 million mark for each employee that satisfies this loophole’s requirements.
Although many employees may see this loophole as a positive for them, this might be a smart move on the part of Uber. Given the fact that Uber can carry out these buybacks at a rate that’s 25–35 percent less than the preferred shares from its most recent funding round, it ultimately sees the greatest benefit. The company can turn around and sell the stocks at a higher rate. Until Uber decides whether or not it would like to go public, it may just set the employee stock offering model for future tech startups.