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This was a job posting on Linkedin, in the software industry.

The rules are that you can sell up to 30k per year. But the job offers 50k (GBP) and it seems that offering shares greatly in excess of the salary is very disproportionate.

I feel like they got together and had a board meeting and asked themselves "How can we make this scam more obvious".

Do I simply not understand, or is this designed to trick people into committing, perhaps as a bait and switch?

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    By "you can sell 30K per year", do you mean that the stock is publically traded and there is a regular market for shares, or do you mean that you can sell up to 30K per year if you can find an investor, or do you mean that can sell up to 30K per year if you get the permission of management? Often, it's impractical or impossible to sell shares in a startup until and unless it becomes a publically traded company. – Brian Borchers Nov 4 at 3:54
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    Hard without seeing a full text... – Duke Bouvier Nov 4 at 21:41
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    By the way: A common way to bait employees into taking a job below market rate is by not promising them stocks but stock options. They are betting on people not having the financial literacy to tell the difference. – Philipp Nov 5 at 9:56
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    Even if it is legit, bait-and-switch opportunities abound due to "creative" ways to structure venture capital investments, some of which involve loans or special shares that pay a bonus if the company is sold for cash. If you think "I've been granted 1% of the shares in this company, so if it sells for a billion pounds I get 10M of that", you can end up very disappointed; your 1% is possibly 1% of what's left after everyone else takes their due from the sale, which can be zero. – Eric Lippert Nov 5 at 17:13
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    About being able to sell 30 k per year, it feels like share vesting : linkilaw.com/startup-advice-tips/what-is-share-vesting. Note that it doesn't mean you can sell 30 k per year. It means that out of the 90 k, you officially get ownership of 30 k per year. The goal being for you to stay on the long term (and not come in, cash out 90 k and leave). As stated above, you probably won't be able to sell it that easily the first few years. – dyesdyes Nov 5 at 19:57
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That would likely be a startup.

So they need a developer who can ask for a good salary, but they don't have that much money. So instead they offer shares.

If the company is successful, due (in part) to the help of the developer, they make lots of money and the shares don't hurt much.

If the company fails and goes bankrupt, the shares are worthless and cost the company nothing.

So you see, from the company's point of view it's a good deal. From the employee's point of view, it's a gamble, not a scam. You may win, you may lose. If you are at a point in your life/career where you can live fine with £50k, you can go for it.

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    This. it's a practical thing for the company, more than anything. They have no cash flow, but have an "idea" that they think is valuable. They are paying you a portion of ownership in that idea, instead of paying you cash. So, you need to decide: do you agree with the value they are placing on their idea? – dwizum Nov 4 at 13:39
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    How does this work with the fact that the amount was given in GBP; rather than in a number of shares? According to the description as given, the employee is entitled to £90,000 worth of shares, not 90,000 shares. £90,000 of shares in a billion-dollar company is the same exact amount as £90,000 of shares in a tiny start-up. – GendoIkari Nov 4 at 19:01
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    Probably important context to your answer (last line) but £50k is far above the uk living wage of £19k and a pretty decent salary – Sayse Nov 4 at 20:12
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    @Gendolkhari - If they are quoting a round-number cash value either (a) they will give him £90k of shares at whatever the current prices is for a listed company or (b) it is an unlisted company and the £90k refers to a nominal par value. I suspect the latter. – Duke Bouvier Nov 4 at 20:44
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    @JBentley - not really. Lets say the company's last financing had some VC come on with £1m for 25% of the company that puts a value on the company of £4m, and £90k is 2.5% of the company. Someone may have stumped up real cash at the price. Or it may be a nominal accounting value - which would likely be much lower, so probably isn't it. For a job-ad that is pitching low-salary + upside equity they may want to quantity the upside in a way that helps get the right applicants. Obviously when it comes to an actual job offer, he needs to kick the tyres. – Duke Bouvier Nov 4 at 21:37
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There may be a couple more restrictions in there, but having been in a couple of companies with a similar employee share scheme it often goes like this.

You become eligible for the shares after being an employee for two years, you can start selling up to your limit after another year. So that's 3 years in the company before you get any of the share money, it then takes you another two years to sell the rest of the shares.

They'll probably be employee only shares, you don't get to keep them if you leave the company and will have to sell them back at a token rate, probably pennies.

The benefit to you is an extra 90k in the long run, depending on company performance which you now have a vested interest in. The benefit to the company is that they've tied you in for 3-5 years before you can have any of that money and it fosters some loyalty in the staff.

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    In the situation you describe it's best, I think, not to consider the 90k to be part of the package. Instead think, "in 3 years time if I'm still with the company I may or may not get a large bonus". Treat it more or less as you'd treat some nebulous profit-sharing scheme that the company says it plans to introduce in 3 years time. Too much can change in that time, to rely on more than your salary, and it's not healthy to let yourself get tied in because you feel it's the only way to get what you counted on. If the company goes nowhere, the shares won't pay out. Most companies go nowhere. – Steve Jessop Nov 5 at 16:57
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    @SteveJessop, in terms of a startup yes. In my case both companies were market leaders and one had been in business over 100 years. It could be taken as read that it was going to work out and in such cases it's a nice scheme to have available as an employee. – Separatrix Nov 5 at 17:12
  • There's a big difference between being given shares by a publicly traded company and being given shares by a startup. – Brian Nov 5 at 19:28
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This is quite what my emplyoer does. Stock compensation is very common among large (American) software companies. New hires usually get a large stock grant worth around $100k or even more. These stocks (called restricted stock units, RSUs) are meant to be vested, i.e. received by the employee, over a period of several years (usually around four). The base salary they offer varies on the location. In the US, base salaries even for new grads can be up to around $150k, while the same company would offer base salaries around $50k-$70k in Europe.

So not, that's not a scam. It's very common.

  • This is a good answer, for stocks with a clear valuation. For instance when traded publicly. If you are about to join a private company it is very easy to lose nearly all the value that you may have been promised. – Dennis Jaheruddin Nov 6 at 13:53

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