Startups Defer Billions in RSU Costs Until IPOs, Shifting Catch-Up Charges to Public Investors
Updated
Updated · The New York Times · Sep 12
Startups Defer Billions in RSU Costs Until IPOs, Shifting Catch-Up Charges to Public Investors
1 articles · Updated · The New York Times · Sep 12
Summary
Billions of dollars in employee stock-compensation costs are being recognized only in the quarter of a startup’s IPO, creating large catch-up charges just as public investors buy in.
The accounting hinges on double-trigger restricted stock units, which are not expensed until both a liquidity event exists and an IPO is deemed “probable.”
Wall Street and major accounting firms have increasingly treated an IPO as not probable until the moment before listing, letting companies from Uber to Robinhood delay recognizing those costs while private.
That conservative timing can make pre-IPO financials look cleaner than post-listing results, raising concerns that retail investors face a distorted picture of profitability.