>"Stripe has "double trigger" RSUs, meaning you don't actually own them until after IPO + lockup period. There are tax advantages to doing it this way, ..."
Interesting. I've not heard of the term "double trigger RSUs" before. What are the tax advantage of this over regular options? Most companies have right of first refusal of secondary market sales of pre-IPO stock. If the goal was to prevent secondary market sales. What does "double trigger RSUs" provide that right of first refusal does not?
There are some benefits for employees. So long as the company goes public, RSUs are worth something unlike options which can be underwater. You don’t have to pay to exercise them. Tax is only due at IPO and treated as normal income. There are none of the rules around AMT. There’s not the risk as with options of paying out of pocket to exercise plus taxes then the stock drops or there’s no liquidity and you’re net negative.
From the company’s perspective, employees with RSUs are not actually shareholders until IPO. All those SEC and state rules about having to report like a public company once you have a certain number of employees are avoided. It essentially lets companies stay private much longer.
The (arguable) tax advantage is that the employee isn’t taxed until they are able to sell the RSUs for the same value they are taxed at (since company is public and lockup is past) so you avoid a tax burden on a non-liquid asset.
The “double” trigger is the ipo requirement plus the usual time-vesting for stock grants
Interesting. I've not heard of the term "double trigger RSUs" before. What are the tax advantage of this over regular options? Most companies have right of first refusal of secondary market sales of pre-IPO stock. If the goal was to prevent secondary market sales. What does "double trigger RSUs" provide that right of first refusal does not?