The Liquidity Event Podcast: Episode 67
Episode 67: Snip, Snip
Well, listeners, Elon's less than a week in and already making unpopular moves by gutting the employee base at Twitter by 50 percent, leaving 3,000 people without jobs. Lawsuits pending. Twitter's not alone in the tech recession, though. Stripe has also announced that it will lay off 14 percent of its employees, alongside a bevy of companies announcing hiring freezes, including Amazon and Lyft. We also talk about updates to SEC's Rule 10b5-1 around plans and declarations surrounding stock trades. Brace for the winter, dear listeners!
Read the Full Transcript:
Speaker 1:
This podcast is for informational purposes only and should not be considered tax or investment advice.
Welcome to The Liquidity Event, a show about all things personal finance with a laser focus on equity compensation. Hosted by AJ and Shane of Brooklyn FI, each episode will take you through the week's news on FinTech, IPOs, SPACs, founder wins and fails, crypto, and whatever else these nerds think is interesting. Learn more and subscribe today at brooklynfi.com.
Shane:
Hello, and welcome to The Liquidity Event. We are your hosts Shane...
AJ:
And I'm AJ.
Shane:
And this is episode number 67 of The Liquidity Event being recorded on November 7th, 2022. That's a Monday. It's a special episode. This week's episode, we have Twitter employees sue the company for terminating them without warning. The war for talent is over. Spoiler alert, talent won. Except the talent got hit with the whale. A whole bunch of layoffs last week. The US midterms elections happened this week and a new law at NYC forces companies to list the salaries in the job description. How are we doing, AJ?
AJ:
I'm doing excellent. I couldn't be better.
Shane:
I love when you're standing at your standing desk. That's generally a positive thing.
AJ:
Yeah, I always forget. It's like I need a Post-it that says, "Stand up."
Shane:
"Stand the hell up"?
AJ:
Instead, I have rude words Post-ited to my screen to make me laugh throughout the day.
Shane:
I'm surprised Nabil doesn't come in and make you stand up. That seems like a Nabil thing to do.
AJ:
Oh, he does. I ignore him. I'm like, "I know. I know. I know." You don't see him deliver my vitamins sometimes out of the corner of the screen?
Shane:
I've seen him deliver so many things to you. Making me rethink my stance on matrimony.
AJ:
I have a great husband. I won the husband lottery.
Shane:
I too would like all three of my meals delivered to my work station, please. Make it four while we're at it. Snacks included.
AJ:
Snacks. Snacks are a must. I mean, we both get to work from home, but anyway, yes. What were you going to say?
Shane:
Oh, I was just going to say that this is a special episode today because we're recording on a Monday, but we're going to be releasing on a Friday, so it's going to be a little bit delayed this week. But we're going to include all those delays in our expectations in our discussions.
AJ:
There's nothing going on in the news, so it'll be totally fine.
Shane:
Right? Yeah, just one day. November 7th.
AJ:
Just a midterm election.
Shane:
Just the fate of the next two years legislatively.
AJ:
But what's most important is that if you're listening to this episode when it releases on Friday morning, you will have just a few hours to register for our "Rent vs Buy" webinar for [inaudible 00:02:39]. If you are in the market for a house or not sure if you should rent or buy, John, our director of planning, and I will be debating that and diving into the current state of the housing market, mortgage rates, all of the above. It'll be a good time.
Shane:
[inaudible 00:02:57] webinars.
AJ:
Almost as good as this podcast, but not as good.
Shane:
Yeah, almost.
AJ:
So, that one's always a spicy one.
Shane:
Yeah.
AJ:
Speaking of spicy ones, spiciness going on over at Twitter. Right?
Shane:
Mm-hmm.
AJ:
We got... Well, Mr. Musk-
Shane:
A spicy one.
AJ:
A spicy one. Mr. Musk came in and, like Sherman marching to the sea, slashed and burned through a bunch of employees. 50% of the workforce was informed that they would be laid off last week, and that's about 3000 people who were told that they would no longer have a job. They are going to get some severance. The details of that exit package are floating around online. Looks fairly generous in terms of a severance package, but obviously a big blow to those who were not expecting to lose their jobs. Ton of coverage on this, right? But this one article that we have from TechCrunch is specifically about a lawsuit that's going on. That some Twitter employees, five in particular, turned around after they were laid off and sued the company. And they were citing something called the Warn Act, W-A-R-N, which is a segment of employment law. Are you familiar with this Warn Act?
Shane:
I'm not. Is this a federal law or is this a California law?
AJ:
It's a federal law, but each state has a different interpretation of it is kind of the way that the article seemed to hint at, like California and New York have different notification periods. And the law is basically that you have to give your employees 60 days notice before a layoff, depending on which state you're in. Of mass layoffs, and they define "mass layoffs" as companies with more... I think it's companies with more than a hundred employees, and I forget the percentage of the workforce that has to get laid off to consider it a mass layoff.
Shane:
Sure.
AJ:
So, they said, "We didn't get enough warning. You can't do this to us." So, there's a pending lawsuit.
Shane:
Is that why he was saying he was going to lay off half the workforce a month or two ago?
AJ:
I guess so.
Shane:
I don't think that counts as an official warning.
AJ:
Yeah, I was reading into it. I actually asked a lawyer friend, and it seems like it's kind of a gray area because they're getting severance, which they don't actually have to do, so that could be seen as their actual termination date could be at the end of the severance, which is more than 60 days. So, we don't know if this lawsuit has legs or not. I was pretty surprised at how quickly these layoffs happened. That was within five business days of taking over the company. Half the company was informed that they would no longer have a job. What do you think the rush is here? Just maximize profits right away?
Shane:
I have no idea. It seems like quite a move for somebody that's been at the helm for a very short period of time. I'm not sure what type of disclosures he got ahead of becoming the owner. Surely he got a ton of stuff. When you're buying a company, you get to look under the hood, but you don't get to meet all the employees or get to show up to the offices and do all the things necessary to get a true pulse of a company wherein you would feel comfortable laying off half the staff. Now, I do know that firing 3000 people in the tech space probably saves you $750 million a year in salaries, as an estimate. Sincerely. So, that probably saved a bunch of money. And I do know that, looking at the terms on the deal related to the loans that he had to take out, the income that Twitter was experiencing prior to these layoffs wouldn't pay off those...
The entirety of their net income would be the interest payments on the loan. So, he really does have to cut something. He has to make something work. He's got to change the nature of the company. But to fire half the team within a few weeks... Now, I do have a rude take, and then I have a nicer take. My first rude take is: "What the fuck were 3000 people doing at Twitter?" When I found out there was 6000 people working at Twitter, a website that I visited for the past 10 years and has had one update that I can remember, which simply increased the amount of characters in your tweet, which doesn't seem like it takes 3000 engineers to implicate, what the hell are they doing? Honestly. I don't know what goes on under the hood that requires... When I think about a scaling company, you would think that... I know that Expensify, a public company, has about 140 employees.
AJ:
Right.
Shane:
Which is an extreme case.
AJ:
Right. At a certain point, do you just keep hiring because you think you're supposed to keep hiring and that's what you need to do to grow? But, yeah, there hasn't been a ton of innovation. I mean, we've heard a guy where both big fans of, Scott Galloway, talk about this a lot on his podcast Pivot about: there's no innovation. They have a CEO who's absentee, who's busy doing other things. There hasn't been a leader to say, "Where is this company going? Okay, we revolutionize the way people consume media in these short, little snippets they could read. What's next? How do we participate in the next disseminating of information? How do you take really smart people who have smart opinions and monetize it?"
That was always their struggle. They failed to monetize it. Instagram did that very well. Meta noticed what Instagram is doing, bought Instagram. Twitter ad sales, not great. So, they got to figure out a way to have all their... They have a massive audience, right? It's this incredible, as we saw in the last presidency, platform that has huge importance in our culture, but they're really struggling to make money. So, I would imagine his 6-month plan is: figure out how to make this thing profitable.
Shane:
By the way, that is a sincere question. I'm not saying, "What the hell are they doing?" I'm genuinely ignorant of what 3000... I'm assuming there's a lot of moderators. I hope moderators aren't all getting fired and the platform's about to get flooded with trash. And then, someone's got to sell the ads. But in terms of the engineering department, I'm not sure. Now, my heart goes out and the softer side is like... Anyone that recently bought a home at Twitter in 2019, 2020, 2021 at historically high prices and low interest rates. But if you're laid off and you can't make your mortgage payment, you might have to have what's considered a distressed sale of your home. Right?
AJ:
Yep.
Shane:
And you don't want to have a distressed sale right now. So many don't want to, because to get back into the market at these 7% interest rates is going to be brutal.
AJ:
Yeah. I mean, I feel for these employees. I mean, Twitter is not a young tech company. Right? They've been around for a while. A lot of these employees have been there since day one. It's been a rocky year to say the least for these folks. I imagine some are, in some ways, relieved that this is kind of over and they have the resolution, because it was so much uncertainty for so long. Maybe I'm projecting, but that's how I would feel. "At least we know the answer."
Shane:
Yeah.
AJ:
Speaking of knowing-
Shane:
A lot of predictions that this company will be owned by the lenders in about eight months, based on everyone quitting the company-
AJ:
How it's going?
Shane:
Yeah.
AJ:
Yeah. The advertisers pulled out. There's been a lot of signals that this is not something that you want to throw money at. Anyway-
Shane:
You had a delicious segue [inaudible 00:09:55].
AJ:
I already forgot it. I already forgot it. I had a segue. It was so good.
Shane:
We can keep talking about layoffs if we want to be really dark off the top of this and then come back to the 10b5-1s.
AJ:
Sure. Yeah, we can circle back. Yep. Yeah, so Twitter was not the only firm to have massive layoffs. Digital payments firm Stripe has announced that they will lay off 14% of their workforce. In stark comparison to the way that Twitter handled their layoffs, the brotherly Irish folks who are at the helm of Stripe wrote an open letter to the company about the layoffs. Why they're doing them. Explaining to employees the RSUs are going to keep vesting, that you have [inaudible 00:10:46]-
Shane:
Their staff wrote a letter and they signed it is what you meant to say.
AJ:
Yes. Yes. That's what I meant to say. Thank you, Shane. Yes. Yeah. It's a very different way to handle something like this.
Shane:
Oh yeah. You're juxtaposing Elon's email, or did they even-
AJ:
Yes.
Shane:
They just emailed everybody on Friday at 9:00. You've got to fire 3000 people. Come on. How are you going to do that?
AJ:
Yeah. I agree with you. If you know you have to do mass layoffs, I think a kind, short email is the way to do it. The Zoom firing that we heard last year, like, "Hey, if you're on this call, you're fired," that's fucking brutal. I'm sorry.
Shane:
Yeah, that's from Better.com.
AJ:
Yeah. Yeah. But, like, "Hey..."
Shane:
At least Elon didn't cry after he fired 3000 people.
AJ:
Yeah. Anyways, but, no, it talks about the RSU vesting. Your 1-year vesting cliff is going to be waived if you're a part of this layoff. There's going to be career support. They're offering a new tier of extra large Stripe discounts for anyone who decides to start a new business. Now, is that just lip service? Maybe. But the gesture is nice, right? When you're feeling emotional about losing your job, this seems like a pretty nice way to do it. Have you ever been laid off before? Never been let go?
Shane:
I've never been fired. No. Nope. Anyone that's feeling like they haven't accomplished much in their life, don't look up the ages of the Stripe co-founders.
AJ:
Oh my God. They're 32. Those fucking bastards. You right Irish bastards. Wait, question. Do you think they sang my favorite-
Shane:
Recently valued at a $150 billion.
AJ:
Do you think they sang my favorite Irish drinking song [inaudible 00:12:26]? Any guess of what my favorite Irish drinking song is?
Shane:
Sunday Bloody Sunday?
AJ:
Well, sing to me the parting glass. You don't know that one? The Parting Glass? Oh, whew. Tears every time. Look it up. Anyway...
Shane:
Okiedokie. Lot of tragedy in the Irish history, I can tell you that. Sure there's some good songs. Looking at the numbers here, they let go of 14% of their staff. You can back into that being around 11000 jobs.
AJ:
Wait.
Shane:
1100 jobs.
AJ:
1100.
Shane:
Yeah, sorry, 1100 or 1000 jobs. I don't know. I'm assuming $200,000 per job. Who knows what they're paying total [inaudible 00:13:13]?
AJ:
Sure. That's fine.
Shane:
Sure. That's $220 million. Okay? So, that's where I got the numbers that I was thinking about earlier with Twitter. You'd 3x that for hiring and firing 3000 people. Anyway, at $7 billion of revenue, that's about 3% of their revenue they just shared. Even if they don't have any, we don't think about benefits or payroll taxes, 401k, insurance, so it's probably more like 4 to 5% of revenue, which I don't think is immaterial at that size. Yeah. I don't know. They're not the only ones doing that, though. We have this other article here about a host of tech companies that announced hiring freezes and job cuts.
AJ:
Yeah. Yep. We've got Amazon. We've got Lyft.
Shane:
It's this week's theme, folks.
AJ:
Yeah, snip, snip. Sorry, back to Stripe for a second.
Shane:
Sorry, sorry.
AJ:
Do you think this announcement is a tick in the "they're going public soon" or "they're going to go public even further down the road"? Do you think it's a signal that they're preparing to go public or not?
Shane:
Let's see, what are they on? Series H at this point? Literally. I think they're on... A, B, C, D, E, G, H.
AJ:
They're in Series A-Z.
Shane:
Right. Which-
AJ:
You know your Excel columns, when you have too many columns?
Shane:
Yeah. I don't know. I don't if they need to go public. I don't know what their 10 is. I don't know. These kids are 32. Do they need liquidity? I don't know. I don't want to make a prediction about... I like the idea that that is an indicator that they're going to go public. I don't think valuations are where they need to be for... They had the last 10 years of insane valuations. There's an internal report that they just knocked down their own internal valuation by 28%, which probably puts them where they were in 2020 or 2019.
AJ:
Right, before the growth exploded. Yep.
Shane:
Yeah. Who knows?
AJ:
Yeah. I mean, there's this narrative like, "All the gains made during the pandemic were slashed and we're back to where we were before." It's like, yeah, that's typically what happens with the cycle, right, is a lot of these companies over-hired because they were booking record profits and life change. If you're Zoom, in a single week, the world started relying on your technology, and now there are other alternatives and people are going back to work. So, this idea of these companies are making drastic shifts and cutting important jobs, like yes, but also they might have over-hired to prepare for revenue that never showed up.
Shane:
Yeah. I mean, we've been there before. It's hard to predict the future demand for your products and the future capacity that you're going to need to supply.
AJ:
In a survey of CFOs of companies with revenue of more than a billion, how many of them do you think rely on advice from-
Shane:
Trying to follow. Trying to follow. Okay.
AJ:
How many of them do you think rely on advice not related to spreadsheets and numbers and reports? For example, a fortune teller or a psychic or a-
Shane:
0%.
AJ:
0%?
Shane:
Zero.
AJ:
I bet it's 6%.
Shane:
Do you think that they're making...
AJ:
Yes.
Shane:
Do you remember the CFO that jumped out of-
AJ:
What about God? What about religion?
Shane:
Oh, religious.
AJ:
Yeah.
Shane:
Oh, fair enough. I would bet there are more Christian CFOs, in America, than other positions in general. The finance industry, I feel like, is pretty religious. Is that what you're asking me?
AJ:
Yeah. Just of these decisions that have to get made. Ultimately, somebody's going to have to recommend this. Right? Someone is going to have to say, "We've got to let 1000 people go." And at a certain point, they're relying on the cold hard facts, but I think, like anything, people pray when they have to make hard decisions. They look to the stars to know, "If Mercury's in retrograde, should you do a layoff?" I don't know. Maybe you should wait.
Shane:
I think they make the decision cold-blooded and then they pray for forgiveness.
AJ:
I know. Right, exactly.
Shane:
And for guidance and for fortitude. Yeah. I don't know.
AJ:
That's awesome.
Shane:
I don't know anything about... Yeah. Thanks for that question, though. Nice softball for your co-host. Anyway, moving on. Other tech companies are experiencing layoffs and hiring freezes. Amazon, Meta, Google, Apple are all seeing freezes in the hiring space or cutting staff. I think we're seeing staff, about 14%, let go from Stripe. Anyone that here that has ever had employees that they've had to monitor, or see if they're the right person for the right seat, knows that you don't always have every right person in the right seat all the time. And when you're hiring as fast as these companies are hiring, extremely quickly at extremely high salaries, there is an inflection point time, like right now, wherein it's probably a good idea to say, "Some of these people probably shouldn't be here."
AJ:
Yep.
Shane:
And as anyone that's ever seen those horribly aggravating TikTok videos of a day in the life of a 25-year-old project manager at Meta, wherein they do about 14 minutes of work and TikTok the rest of the day away, I think we all know who's getting let go here at these companies at this point. Right?
AJ:
Yeah.
Shane:
I mean, at every company, especially ones hiring this fast, 5 to 10% of the workforce are underutilized or over-capacity or just a bad fit, or you're hiring for future growth and that growth isn't showing up, essentially. And you can't always predict when that's going to happen. I mean, COVID has been extremely difficult to predict, and now we're heading potentially into a recession. We're on the cusp here of a not-very-soft landing from the feds' interest rate manipulations. I don't know. What do you think?
AJ:
Right. Well, 14% in one day or one week feels extreme, but 14% over a year in terms of turnover... I mean, a couple weeks ago, we talked about Amazon's incredibly high turnover. That's not crazy. It just feels extreme because it happened in such a short period. To your point, there's people at these companies who are maybe not a good fit. Or there is not as much work as they thought. Or they decide to kill a project because it's not profitable. Or they move up something on the roadmap and they have to let a whole team go. This stuff happens all the time. It's just when the narrative is, "We're heading deeper into a recession and the economy's not going to survive this," we hear layoffs, that makes for a great news story. Let's pile them all together.
Shane:
Yeah. I don't know why I'm coming off as pro-corporate here, but all I'm trying to say is-
AJ:
Yeah, you are.
Shane:
He owns a company once. If you have to train somebody to be good at their job, you generally hire them a year before they're going to be useful; or six months ahead of them being useful. They need to get up to speed on tools and ideal client and how to serve them, and to be able to perfectly predict the capacity that you're going to need a year in advance is very, very difficult. So, I imagine these people that are getting let go are the ones that were predicted to be at-capacity or needed to be useful about a year ago. A year ago, November of 2021, we weren't looking as shaky ground macroeconomically as we are now.
AJ:
No. All these [inaudible 00:20:46] were on a hiring spree and we were talking about how all of the power lay in the hands of the employee, because we had clients with six competing job offers in the mid six figures. Employees were kings and queens.
Shane:
I think they still are, though.
AJ:
I think that's still the case. I think that's still the case.
Shane:
Yeah.
AJ:
Yeah. Yeah, but-
Shane:
Yeah, we have a couple other articles that are more rosy on the employment space. I mean, unemployment is still a 3.7%, right?
AJ:
Yeah.
Shane:
It's still a very tight labor market. Do you want to pivot to that or you want to talk about Coinbase and the truth about tech layoffs [inaudible 00:21:22] information article, or are we being dark enough?
AJ:
No, let's talk about the... We've got this article from CNBC: "The war for talent is over. Talent won, says PwC chairman Tim Ryan." So, what did he say? He says, "3-day or 5-day mandates for workers to go back to the office are out of touch. There's been a permanent shift in the balance of power between labor and management." He says, "Work has traditionally been designed to provide the illusion of choice, but now employees' demands for real choice must be taken seriously." I just love that quote so much. He's kind of right. I remember being an employee and having this... They had the whole benefits presentation. They tried out this and they tried out that, and they go, "Well, you get to choose which days you have off," and I'm like, "Yeah, I guess so. Thanks for that." And now, the tables have turned because of labor market. What else did this piece say? You got something for me, Shane?
Shane:
Yeah, as a former PwC employee, I do have some comments about the CEO commenting on the war for talent. I mean, this is a guy talking his book. I mean, if you're trying to decide between Deloitte, PwC, KPMG, and EY, if the head of PwC is saying, "Hey, our employees won the war," well, yeah, that's great marketing when it comes to talent acquisition, which is the whole game at a place like PwC. I mean, all they do is they take 23-year-olds out of college and they grind them 2500 hours a year at very high rates, and they have a war of attrition. I think it's like 1% of the people that start there end up becoming partners, and it's just a pyramid. And the whole angle of these companies is to push work down to associates that are willing to work these insane hours, nights and weekends, or as long as possible before they get a different job somewhere else. I mean, we've poached plenty of employees from these firms to come work [inaudible 00:23:17].
AJ:
You know who's not doing layoffs right now?
Shane:
Who's that?
AJ:
Accountants. Accounting firms.
Shane:
True. True, true, true. They haven't done layoffs since I entered the workforce back in 2009. The Great Recession, when there were actually a bunch of companies disappearing and there was less work to be done, and people were less willing to pay the rates that... I do remember at PwC they just froze salaries. Your salary was frozen.
AJ:
It was locked. Yeah.
Shane:
So, I think Deloitte or EY, they actually did lay people off back then. Those were kind of the two choices that they had. But, yeah, another interesting thing about PwC: We have to keep in mind who is writing this article and why they're speaking this way. Two-thirds of the workforce at PwC is millennials and Gen Z.
AJ:
Jesus Christ.
Shane:
Oh yeah. It's incredible.
AJ:
That's actually awesome. That's great. I find that actually hard to believe.
Shane:
Well, they do a pyramid. I mean, at this point, you can be 41 and be a millennial. My big sister is technically a millennial. She's 42. Oh, wow, you just aged yourself there by saying that's hard to believe. Oh yeah.
AJ:
What do you mean?
Shane:
My millennial sister has two 16-year-old kids.
AJ:
No, but I just mean when you think of it like... Anyway, that was my own personal opinion. That was not a-
Shane:
Well, that's what I'm also saying about PwC is, if you're listening to this, he's speaking to young people that want flexibility that aren't necessarily, "I've got my family. I want to go into the office. I want an old-school type of office experience like the baby boomers are used to." So, for him just to preach his book this, he's speaking to young people that want to be able to work from Thailand, but also probably work 2500 hours from Thailand.
AJ:
Yeah.
Shane:
Type of thing.
AJ:
Right.
Shane:
Yeah.
AJ:
And 2500 hours is a lot of hours, correct?
Shane:
I'm sorry. Yeah. There are 2000 hours in a year. Technically, for work hours, if you do a 40-hour work week by 50 weeks per year, assuming a 2-week vacation, there's about... Yeah. Well, we used to track our hours to the T back when you work in public accounting, because it's all about charging as many hours to a client as possible. That's the whole goal, which incentivizes you to work quite slowly because then you'll be able to add up a bunch of billable hours to a project and charge the client a bunch of money. So, yeah, the more hours, the better, carte blanche. Essentially, the less of a personal life you have, the better at PwC and other Big Four companies, which says a lot about people that work there, including [inaudible 00:25:42].
AJ:
Oh. Spoken like a true former employee of PwC.
Shane:
A true former employee that almost got laid off.
AJ:
Right, right. But you've clawed-
Shane:
Because I was 24 years old in Austin, Texas.
AJ:
This is Shane. It's like that little cat, like, "Don't fire me, please."
Shane:
Yes, I was close. I got called into my partner's office and was told that a corner needed to be turned otherwise there would be making changes staffing-wise. And to be fair, I did turn a corner, but it was around the time that my dad got sick for the last time, so I ended up putting my notice in back in December of '13.
AJ:
So, no hard feelings between you and PwC.
Shane:
Oh, we're all good. Yes.
AJ:
Great. Great, great, great. Speaking of hard feelings, I do want to make sure we talk about this 10b... You know I love 10b5-1 plans.
Shane:
Sorry, I just feel like I ranted about Big Four for a while.
AJ:
It's all good.
Shane:
Yeah, so let's talk about 10b5-1.
AJ:
It's all good. Just a refresher for those not in the know: 10b5-1 plan is if you are an executive, or a person at a company, that has material nonpublic information, meaning something about the company's future that the public doesn't know. You will have to make a declaration to the SCC of the stock trades that you want to make within a certain period, because it would not be fair for you to trade the stock on information that no one else had. So, 10b5-1 plans, they're relatively young. They're younger than us. They're about 20 years old. And it's been a mixed bag of whether they actually-
Shane:
Oh, speak for yourself.
AJ:
What?
Shane:
Speak for yourself. I'm 19.
AJ:
Okay. You always throw me off with your dumbass comments.
Shane:
Necessary interjection. That's what I feel like when you insert a "wah-wah-wah" in the middle of one of my rants. Consider that my "wah-wah-wah."
AJ:
Yeah.
Shane:
All right, do your 10b5-1.
AJ:
All right.
Shane:
So, they're about 20 years old. They're intended to allow insiders to trade.
AJ:
Yeah, but were these plans successful or not? So, the idea is that it's, "Hey, let's not let a CEO who knows that they are about to take the first cancer-curing drug to market and literally no one else knows that. They should buy the stock now and then sell it once that announcement happens." But I don't know if they're actually successful. So, we like 10b5-1 plans because it's just hard to diversify when you own so much stock in one company, so we like them for just a regular trading schedule. Sell a certain amount each month at the same time, or each quarter at the same time, and just slowly move out of this position.
That's really not how they're being used by these executives who have tens of millions of dollars of holdings in these companies. So, they've been under a scrutiny. There's a bunch of changes by the SCC to make them a little harder to change, right? Because right now you can put your 10b5-1 plan in place today and you can start trading tomorrow. So, you can say, "Oh yeah, I don't know anything about that new drug that's coming out. Here's my 10b5-1 plan. And, oops, I just made $70 million. Good for me."
Shane:
Quite a few sales here on this 10b5-1 plan.
AJ:
Yes. Yeah.
Shane:
Can you also have two in parallel?
AJ:
You can stack as many as you want on top of each other. The rules-
Shane:
So, you can have one 10b5-1 plan where you sell one share per quarter, and then you can have another 10b5-1 in parallel active at the same time where you sell 1000 shares per quarter, and then, "Oh, we're doing well, so I'm going to cancel my one-share-per-quarter 10b5-1 plan."
AJ:
Yep. You ready for my radical soapbox idea that you're going to make fun of me for?
Shane:
Yes. Can't wait. Chomping at the bit.
AJ:
So, if you are an "insider"... That's what we call these people who have inside information. If you're an insider with material nonpublic information and you are planning to trade more than $10 million of stock in one year, you have to choose from a pre-selected menu of 10b5-1 plans; and you get to sell monthly, quarterly, or semi-annual, and that's it. You don't get to pick the date. You don't get to do anything. You just say, "I want to diversify," and Congress and the American people pick the plan that you abide by. You get to diversify. But, to me, that's kind of the only way to actually avoid any kind of unfair timing here. Never going to happen, but it could work.
Shane:
I have no notes. No notes. I think it's great.
AJ:
Okay. Cool.
Shane:
I think it's a good idea.
AJ:
Let's do it. Let's do it.
Shane:
I think it would mess with our service model for our executives that we create 10b5-1 plans for, but-
AJ:
But that's what we built, basically. We built a tool that does that.
Shane:
True.
AJ:
Simplicity is a better financial plan than unnecessary complexity. And that's what I leave you with, folks. Thank you for listening to The Liquidity Event. You've been a fantastic audience. You could find the show notes at brooklynfi.com/episode67. Email us at liquidityevent@brooklynfi.com. Leave us a voicemail. We will play it on the air. [inaudible 00:30:25] can leave a review if they want [inaudible 00:30:27] about it. We will see you next week.
Shane:
Bye. Bye, bye, bye.
Speaker 1:
Thanks for listening to The Liquidity Event, hosted by AJ and Shane of Brooklyn FI. Head on over to brooklynfi.com where you can subscribe to the podcast or YouTube channel, or if you want to learn about their full-service, financial planning, tax, and investment firm specializing in tech professionals and creatives on the path to financial independence. We'll see you next time on The Liquidity Event.