NORTH AMERICA CHAPTER

Stripe is planning to buy back shares from its employees in a new tender offer, financing it independently as speculation grows about a potential IPO. This follows a recent valuation of around $70 billion, spurred by Sequoia Capital's offer to buy shares from investors, signaling confidence in Stripe's improving financial health, including a reported $615 million in free cash flow last quarter. Despite the rising valuation and industry speculation, the Collison brothers have not indicated any immediate plans for an IPO.

Elon Musk now requires employees at X (formerly Twitter) to submit one-page reports detailing their contributions to access stock grants, tying stock awards to the anticipated impact of their work. This is part of Musk's broader approach of enforcing strict and unorthodox employee policies across his companies, including delayed promotions, mandatory in-office work, and intense work expectations. Musk's leadership style, characterized by high demands and frequent layoffs, reflects his personal work ethic and has led to significant turnover and contentious relationships with labor unions.

Publicly-traded companies often exclude stock-based compensation from EBITDA and cash flow to present a more favorable financial picture, even though this practice dilutes shareholder value. Snowflake, a data warehouse provider, exemplifies this by reporting high levels of stock-based compensation—43% of its revenue in the recent quarter—while simultaneously announcing a $2.5 billion share buyback plan that fails to offset the dilution caused by new equity issuances. Despite these tactics, Snowflake remains unprofitable, with slowing revenue growth, leading to investor dissatisfaction and a significant drop in its stock price.

Section 409A of the Internal Revenue Code governs the taxation of stock options and other deferred compensation, requiring companies to follow strict compliance standards to avoid severe tax consequences. This regulation was introduced in response to corporate scandals like Enron, aiming to enhance transparency and fairness in deferred compensation practices. For startups, compliance with Section 409A involves obtaining a 409A valuation to determine the fair market value of their stock, ensuring that employee stock options are priced appropriately and avoiding potential tax penalties and legal issues.

Morgan Stanley at Work has launched a new digital experience for financial benefits participants, featuring a public-facing website designed to enhance the pre-login experience. The site aims to improve accessibility and understanding of employee benefits through intuitive navigation, educational content, and support options, including a "hand raise" feature for connecting with Financial Advisors. This launch follows the completion of Morgan Stanley's back-office integration of E*TRADE and Solium, and it provides a unified entry point for participants to access a wide range of financial services, including equity compensation and retirement plans.

Revolut is in discussions with Greenoaks to sell around $500 million of employee-owned shares, aiming to boost its valuation to $45 billion ahead of a potential IPO. The sale would allow early employees to cash out their holdings, a common practice when startups go public. This move also positions Revolut advantageously despite the uncertain IPO climate due to recent higher interest rates.

Stewart’s Shops, a northeastern chain of ice cream shops found at gas stations, offers a unique benefits package allowing employees to own a third of the company through an Employee Stock Ownership Plan (ESOP). This program has resulted in more than 175 employees becoming millionaires, as they receive dividends based on the company's success, which are entirely funded by the company. Stewart’s system, resembling a form of socialism, enables employees, referred to as "Partners," to have a vested interest in the company's success, leading to substantial financial gains and long-term stability for both the employees and the company.