Investor-Grade Assets in Tech Equity

Is Working for Tech Equity a Gamble?

Last week, I reported on the Lacework acquisition and the devaluation.   This action will wipe out most, if not all, of the equity value of the employees who worked there.   With this and other activity in the private market, I hear a lot of the same noise online. 

“The Game is Rigged”

“Employees always get screwed in tech companies.”

“You must be so lucky to make any money in tech.”

As someone who intentionally built wealth trading for tech equity, I find it frustrating to see this disinformation spread.

The Facts Matter

Many tech professionals struggle to find the truth about tech equity and with little to no education (outside of this fine publication 😃 ) out there, uneducated rants can take people off course for years. I know it did for me.

I chose not to work for tech equity for years because I thought it was too risky.

However, I learned that by seeing equity through an investor’s eyes, you can make thoughtful decisions that reduce risk and increase the probability of success.

Common Misconceptions of Tech Equity:

• Believing that working for tech equity is a gamble.

• Thinking the game is rigged and only works for some people.

• Working for early-stage start-ups is the only way to make significant money working for equity.

These misconceptions lead people to believe that you can’t intentionally build personal wealth working for tech equity. 

The Truth:

When understood and managed wisely, tech equity can be a powerful tool for building lasting wealth and achieving financial independence.

Today I want you to get a clear view of low-risk equity compensation.

Three Traits of Conservative Tech Equity:

Low-Risk Tech Equity is what you will find at large public companies like the Magnificent 7 of Apple, Amazon, Netflix, Google, Meta, etc.

Beyond these well-known names, there are others, including Salesforce.com, Okta, Zscaler, and CrowdStrike.

All these companies offer their employees stock compensation as Restricted Stock Units.

All of these companies’ stocks are similar in being public and liquid. I want to examine these essential traits to find valuable public company equity compensation.

1. Liquidity:  The ability to convert the stock to cash.

 Why It’s Important: Wealth is built with concentration but maintained through diversification. Reducing your position is critical to realizing gains. Liquidity is what makes this equity compensation conservative.

 Actionable Tip: Target working for a public tech company to start building your portfolio early in your career before venturing into private companies.

2. Flexibility in Selling Schedule:  The absence of restrictions on the sale or transfer of equity.

 Why It’s Important: Enables strategic portfolio diversification when you want it versus when the company says you can.

 Actionable Tip: Review the Candor RSU guide to check out your current or target company sales policy.

3. Stock Value Stable and Growing: The potential for equity to increase or maintain its worth over time.

 Why It’s Important: Protects and potentially enhances your financial gain. The more the stock grows, the more money you make in your sleep.

 Actionable Tip: Read and review public company financial data. These companies have to report on financial activity, so this is straightforward.

Now You Know:

These three are very straightforward and can be used to evaluate the quality of conservative equity compensation.

On average, people who work for public tech companies make more than those who work for start-ups because they receive stock with a market value and liquidity every year as part of their compensation package.

Now you know where the real value in tech equity is today.

Many of these public companies want to keep their employees there for long periods of time and compensate them well to retain them against the threats of new hyper-growth start-ups.

Read the following article, as you will see that some companies are now exploring giving employees cash or stock.

Thanks for reading this week.

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Amazon's Pilot Compensation Structure: Cash Vs RSUs

Amazon is introducing a very interesting compensation package pilot, giving employees more control over their financial rewards.

This move highlights a pivotal shift in employee compensation strategies within large public tech corporations.

Understanding Your Options

Mid Level Management Employees at Amazon will now have two compensation options:

1. 100% of Stock Compensation in RSUs: Employees will continue receive 100% of their stock compensation in Restricted Stock Units (RSUs).

2. New Cash & RSU Option: Employees can receive 75% of their compensation as RSUs and convert the remaining 25% into cash.

This change offers an option that lets people lock in a portion of the compensation in cash that will be taxed the same, but offer something different.

Analyzing the Impact

- Option 1: This is the traditional route, where employees fully invest in Amazon's growth through RSUs. It's potentially more lucrative but carries higher financial risk depending on stock market fluctuations.

- Option 2: This option provides a safer alternative for those who prefer stability and predictability in their financial planning. It's particularly advantageous for employees looking to secure funds for foreseeable expenses like a wedding or a home down payment. This option locks in the cash value upfront, unlike the fluctuating value of RSUs.

Strategic Considerations

Opting for the second option doesn't merely mean selling off 25% of your RSUs; it's about securing a guaranteed cash sum at the point of the grant, offering predictability well before the vesting period. This nuanced financial strategy shields from downward market trends while still participating in potential upside as the stock grows.

Broader Implications

Historically, sticking with RSUs meant banking on Amazon’s stock, outperforming other investment avenues over the vesting period.

However, the new structure only requires the stock to outperform its value at the time of the grant—a considerably less daunting gamble.

This shift could significantly alter how Amazonians approach their long-term financial planning and investment strategies.

This new approach by Amazon could set a precedent in how tech giants empower their employees to manage financial risk while fostering a deeper engagement with the company’s growth trajectory.

Tech Equity and Money Talk is a weekly podcast showing you how to work for tech equity as a wealth-building strategy and meet your financial goals.

052 🎙️ Five Critical Money Lessons with Landon Loveall, Tech Specialized Certified Financial Planner

Managing Equity Compensation is not easy. No one knows this better than Landon Loveall, a Certified Financial Planner who works exclusively with Tech Employees.

Today, he shares with us 5 Critical Money Lessons for Tech Employees.

This one is straight to the point, and I would recommend a listen.

When you are ready, there are 3 Ways I can Help You:

1.) Get started on your learning - 🎧️ Follow our Podcast

2.) Watch our Videos - 📺️ Subscribe to our Channel

2.) Build a Career or Money Strategy 🧠 Book a 1:1 coaching session

Disclaimer: This newsletter is for informational purposes only and does not constitute financial or career advice. Always consult with qualified professionals before making any decisions based on the information provided.