The Hidden Costs of Snap’s Employee Shares

Snap could be the biggest tech IPO in years but its employees don’t yet have many shares to sell off, according to the company’s filing for an initial public offering on Thursday. That’s partly because of a policy that requires them to wait longer than usual for their stock awards to vest. It could also hurt Snap’s share price years down the line as the company’s total number of shares spikes.

Only around 1 in 4 stock awards granted to Snap employees had vested by Dec. 31 of last year, according to an analysis of its filing. Compare that to Facebook, which went public with about two-thirds of its stock awards vested. Twitter and Square went public with more than 30% of their stock awards vested, respectively.

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Of course, the IPO pricing and subsequent performance on public markets ultimately determine employee gains, or the lack thereof. When Square filed for a public offering, it had outstanding stock awards worth around $1.4 million per employee, but the company priced its public offering well below its private valuation, pushing many employees’ options underwater.

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The value of Snap employee stock awards has also appreciated less than those of other high-profile tech companies that filed to go public.