this post was submitted on 23 Feb 2024
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Not to defend Huffman, who's a huge asshole, but...
He wasn't really oaid 193 million. That's the value (on paper) if the stocks and options he received. His actual salary eas 341,000$.
"he wasn't actually paid in money. it was just the value of the gold bullion he received".
Is that better somehow? I never understood this logic. Money itself is existentially just paper with no value until you spend it on something, and its value also rises and falls based on other factors. It's basically stock in the US economy.
Why is it not okay to give someone one kind of paper but not another?
Are you asking why stock of a single company is different from "stock" of the richest country and only superpower on earth?
Also, money is liquid, can be spent immediately. Stock is not liquid, it has to be traded, vested, etc. and given enough stock will tank yje value if too much of it is liquified at once.
Yeah, they don't sell it or trade it usually, they use it as collateral for loans in cash.
Because those stock grants are conditional on a lot of things. It's not money yet, it's potential money if certain things happen. Yes, those things are likely easily achievable - they either unlock over time, or on the IPO, as long as he is still with the company. But until they vest, they don't fully exist yet.
FWIW, when they do vest the IRS will consider the value of the stock on that day as income. They don't mess around with that shit. Even if he decides to hold the shares, he will still need to pay taxes on them based on their value on the day of vesting, but not before. He has people to advise him on what is best to increase his treasure horde, though.
That much stock is not easy to sell, he'd tank the value of the entire company and never retain anywhere near 193M. You could sell that much gold.
Money is not wealth. That's a very big difference.
Separating these things is how the rich avoid paying taxes.
Stocks and options that he's about to unload in the open market, assuming they will be vested. I think that's the real reason why they are opening up the IPO to Redditors. They want a fair amount of the stock - but not too much! - sold to people with an emotional attachment to it, who won't get in the way of their selling.
Note the Trump people playing the same exact game with DWAC.
He can't unload all his stock for $193m.
I don't like the idea of calling it a non-payment when receiving compensation in the form of valuable assets in addition to money.
Receiving stocks or gold bricks or houses or blow jobs, or anything else of value, is payment, and should be taxed as such.
For the record it absolutely is taxed as such. As soon as it vests the IRS considers it income, whether they sell it for the cash or not.
Its a huge headache for startups sometimes. I had team members I wanted to compensate but just giving them the equity would have been an imediate big tax bill on a non-liquid, and speculative, asset. There's ways to massage it (like vesting) but he will absolutely have that taxed.
Oh, and I could be wrong but I think the share value is just taxed as ordinary income, not capital gains. Ie: if the award is denominated in $1 shares, which he sells for $1.10, the $0.10 gets capital gain rates (if he held it for a year) but the $1 is taxed just like a paycheck.
Is there an equivalent of the sell-to-cover withholding strategy for stocks that aren’t publicly tradable?
I don't see why you couldnt, but you'd need a buyer. Like if you had a funding round you might include in part of your use of proceeds a small buyback/ sell to cover like you're talking about. If the company was doing the sell to coverthats definitely easier cash wise than a bonus but not 0.
All these rules make total sense, they're just hard for really early companies. The lawyer calls alone on this stuff start to add up in a hurry and if you skip them you may have just screwed the people you want to help and muddied things for any future raise.
"Dear IRS, this year I received 69 blow jobs. How much do I owe on this?"
AND it’s the board that decides on his remuneration, not himself.
I think he is fully expecting the 193 Million to tank as soon as it goes public. Hence why he paid himself so much. The value right now is whatever they say it is.