(Bloomberg Opinion) -- Much has been written about who stands to make a fortune and who won't from Uber Technologies Inc.'s coming initial public offering. One constituency that has been largely overlooked is Uber's rank-and-file employees, for whom the IPO isn't necessarily a wildly happy milestone.
Uber's share price has been relatively flat in its significant stock sales to private investors since the middle of 2016 at about $49 a share, according to an analysis by EquityZen, which has a marketplace for trading employee stock in startups. The company is expected to price its IPO late Thursday, and it may be at roughly the same share price or a bit lower. In other words, Uber's share price hasn’t budged in nearly three years.
Why does this matter for employees? Consider a hypothetical Uber employee who was hired in late 2016 and might have received a compensation package that included the right to receive 10,000 Uber shares in the future if she stayed with the company for several years and met other milestones.
Those shares, based on what large private investors had recently paid for Uber's preferred shares, would have been worth about $500,000 back then.(2) In Thursday's IPO, they might also be worth about $500,000.
Half a million dollars is life-changing money for most people. But if you go to work for a hot startup, it can be a huge risk. Most fail. So when things work out, many workers have visions of their company stock zooming up in value. Uber is a success, and the value of the stock hasn't budged for awhile. The Information reported on Wednesday that at a recent all-company meeting, an Uber employee asked about the relatively static share price.
No one is crying tears for Uber workers who make significant salaries plus stock awards. But in the constant Silicon Valley battle for talented engineers, a flat stock price isn’t a great retention tool. It's easy to imagine that if someone has dreamed about Uber's share price doubling in value by the time the company went public, the reality of the IPO may not meet their expectations. Remember, too, that Uber employees have been through the wringer in the last few years with management drama and a reckoning over the company's treatment of workers and overall corporate culture.
Uber's example shows that employees at startups – particularly those who come aboard when the company is more mature – often don't get rich, even when the companies are successful. Many workers are at the bottom rung of stock holders and tend to have less information about their company's value and prospects than just about anyone else who holds shares. Square Inc. engineer Jackie Luo has a running Twitter thread with examples of how tech workers fared with their equity. There are as many shattered dreams as hefty windfalls in there.
Mary Russell of Stock Option Counsel, which advises employees on compensation at startups, said people evaluating job offers should analyze only what the proposed equity is worth at the time of negotiation, not what it could possibly be worth in a dreamy future. That’s not always easy, because Russell said startup recruiters sometimes suggest that a 10-fold increase in valuation in the past is an indication of what prospective employees can expect from their wealth.
It's important to say that like most employees of newly public companies, Uber workers aren't permitted to sell their stock for at least six months after the IPO. The shares may go up in value significantly by then. (Or they could go down. Shares of rival Lyft Inc. have fallen 25% since its IPO in late March.) And of course some of Uber's more than 22,000 employees – those who joined early on and were able to sell Uber stock before the IPO – will have or already had the yacht-worthy startup windfall of popular imagination.
There will be celebrations at Uber's San Francisco headquarters this week. But not everyone may be in the mood to party.
A version of this column originally appeared in Bloomberg’s Fully Charged technology newsletter. You can sign up here.
(1) Startups do independent valuation assessments for the types of stock held by employees, and it tends to be lower than the price that investors pay for preferred shares with more rights.
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Shira Ovide is a Bloomberg Opinion columnist covering technology. She previously was a reporter for the Wall Street Journal.
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