General consensus when RSU’s vest?

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SnowBog
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Re: General consensus when RSU’s vest?

Post by SnowBog »

epargnant wrote: Sat Sep 18, 2021 3:15 pm
SnowBog wrote: Sat Sep 18, 2021 2:58 pm
epargnant wrote: Sat Sep 18, 2021 2:45 pm
SnowBog wrote: Sat Sep 18, 2021 12:59 pm
Bottom line: decide how much of your portfolio you are comfortable having in your employer stock (I've seen 0-15% recommended as max), and take action not to exceed what you are comfortable holding.[/i]
Isn't it interesting, though, that usually the only people to ask themselves that question are people who are given company stock? Does anyone ask themselves that question if they work for a publicly traded company who does not provide any stock to employees?
Probably very few...

But I did/have... Personally, I like being "invested" in my employer - even if a token amount, as I take some naive value from "working for myself" (as being a shareholder).

This has been true in all but one (my first) of my publicly traded employers. Only the most recent has RSUs. Some of the others had ESPP, options, etc. But I have bought - with my own cash - employer stock before.

So I'm not opposed to people having some investment in one's employer. But there's a huge difference in risks between having <= 5% of one's portfolio vs. > 15% in an employer stock, which I think grows exponentially as that % increases.
Oh that is an interesting perspective. Perhaps since it's never occurred to me to buy a single stock, it would never occur to me to buy my company's stock either. Do you buy other single stocks of companies you like? Or is it solely ones you work for?
Well, I'll freely admit that before 3+ years ago I was "financially illiterate", as I hadn't yet found my way to BH. And I haven't switched employers since I became a BH. So I haven't "tested" myself for what I'd do going forward... (Although at this point, I can't imagine switching back to an employer without some form of RSU/options/ESPP/etc. - so I think I'd likely be able to get my exposure through that...)

That said, I have bought 2 individual stocks since becoming a BH... Less as "investments", more for the potential benefits. Previously to COVID we've enjoyed cruises, and hopefully will get to return to cruising again in the future, and maybe even more when we retire someday. Some cruise lines give benefits, like onboard stateroom credits, for "shareholders" (I think minimum of 100 shares is required). As prices were crashing in early 2020 I took a gamble and bought 100 shares of CCL for < $1000, figuring we'd likely make that up after several cruises (assuming they don't go bankrupt, but the < $1000 wasn't going to ruin our plans if they did). We've since booked a cruise on NCL for 2022, and at the time bought 100 shares (unfortunately not at as highly discounted prices), again thinking that we might break even just on the onboard credits over our lifetime. But combined these are well under 1% of our portfolio - so aren't going to make a big difference either way...

I have no plans to "invest" in any other single stock (outside of maybe a small tilt to my employer).
fortunefavored
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Re: General consensus when RSU’s vest?

Post by fortunefavored »

TomatoTomahto wrote: Sat Sep 18, 2021 3:40 pm
fortunefavored wrote: Sat Sep 18, 2021 2:03 pm As someone who was involved in many "potentially company ending" issues at Fortune 500 companies.. there is no scenario I would ever hold onto RSU. Sell them like a hot potato. These were issues where it was "eyes only" with executives and limited teams - everyone put immediately into scary sounding supplemental NDAs, trading freezes, etc. I'd say maybe 1 out of 20 were eventually shared publicly.

You know nothing. If you do know something, you should be on a planned sale plan like execs to avoid insider trading accusations.
I once worked with a CIO who thought he knew something. He had enough, but was greedy. When the company died, it was too late for him to sell at better than pennies on what had been many dollars. Being an insider isn’t always enough.

I knew him at his subsequent job, which he never really adjusted to. He was a really nice guy. I lost track of him after he lost that job.
Right, even if you know.. the asymmetric risk/reward of holding a single stock is not worth it. Yes, that has been utterly wrong advice for FANGM the past few years, but you can be lucky with a bad strategy. I assume all the 100% (or more) equity folks will be in the same category if we hit a 15 or 20 year secular bear.
CletusCaddy
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Re: General consensus when RSU’s vest?

Post by CletusCaddy »

epargnant wrote: Sat Sep 18, 2021 3:25 pm
CletusCaddy wrote: Sat Sep 18, 2021 2:59 pm
epargnant wrote: Sat Sep 18, 2021 2:45 pm
SnowBog wrote: Sat Sep 18, 2021 12:59 pm
Bottom line: decide how much of your portfolio you are comfortable having in your employer stock (I've seen 0-15% recommended as max), and take action not to exceed what you are comfortable holding.[/i]
Isn't it interesting, though, that usually the only people to ask themselves that question are people who are given company stock? Does anyone ask themselves that question if they work for a publicly traded company who does not provide any stock to employees?
People who chose to work for companies that pay in stock probably believe that stock will outperform, otherwise why would they agree to be paid in stock?
When my husband accepted his first job with RSUs, we were not thrilled about the pay structure, but it was a great opportunity. We made sure the base pay was enough to live on, and we use RSUs for savings and one-time projects/purchases. We try hard not to count on it, and I hate following the stock price and knowing our yearly total comp is based on a fluctuating data point. I'm personally not a fan of RSUs, but such is the world my husband works in right now so we can't really get away from it. I tell myself it's much the same for people who get variable bonuses throughout the year that they can't really count on. And would they use those bonuses to buy company stock? (Some would- as SnowBog shared.)

Even without RSUs, do people chose to work for companies whose stock is doing poorly, which could be reflected in future layoffs?
Even in tech, there are companies known for paying largely in cash or have stock vesting plans that are similar to paying in cash.

I used to work for one of these, and earned my base salary plus cash bonus. I got bored and didn’t feel like I was moving forward in life or in compensation.

I moved to a company that I thought had great growth prospects and was known to aggressively compensate in stock. The new offer vs the old company was actually very close, the difference was that the new offer was 20% RSUs.

Three years later, the stock price has quadrupled and my comp has almost tripled. Not all of it due to stock appreciation, there was a big promotion in there as well (not entirely unrelated to the fact that the company was growing like crazy).

Generally speaking people should choose to work for healthy growing companies, whether or not they’re compensated in stock. Growth produces benefits in company culture, personal opportunities, the caliber of talent you work with as coworkers. And if you choose to work for one of those companies, it’s not such a mental leap to want to benefit from that growth via stock compensation.
Marseille07
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Re: General consensus when RSU’s vest?

Post by Marseille07 »

CletusCaddy wrote: Sat Sep 18, 2021 3:52 pm Even in tech, there are companies known for paying largely in cash or have stock vesting plans that are similar to paying in cash.

I used to work for one of these, and earned my base salary plus cash bonus. I got bored and didn’t feel like I was moving forward in life or in compensation.

I moved to a company that I thought had great growth prospects and was known to aggressively compensate in stock. The new offer vs the old company was actually very close, the difference was that the new offer was 20% RSUs.

Three years later, the stock price has quadrupled and my comp has almost tripled. Not all of it due to stock appreciation, there was a big promotion in there as well (not entirely unrelated to the fact that the company was growing like crazy).

Generally speaking people should choose to work for healthy growing companies, whether or not they’re compensated in stock. And if you choose to work for one of those companies, it’s not such a mental leap to want to benefit from that growth via stock compensation.
I agree 100%. I remember one poster lamenting how their stock went under; well, we all have to cut the losses early, but choosing a winner is part of the game. And if you are on a winning side, riding the wave is a no-brainer.
AnEngineer
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Re: General consensus when RSU’s vest?

Post by AnEngineer »

sunsetting101 wrote: Sat Sep 18, 2021 3:04 pm
rage_phish wrote: Sat Sep 18, 2021 1:39 pm
SnowBog wrote: Sat Sep 18, 2021 1:34 pm
rage_phish wrote: Sat Sep 18, 2021 1:26 pm Thank you everyone

Another question…are they taxed twice?

Once when they vest and then again when sold?
No - at least not in how you are thinking.

Let's say the amount at vest is $100 per share, that is ultimately reported through your W2 and taxed as normal income. Your employer may withhold shares to help cover taxes, and that may or may not be enough. But it's already taxed at vest.

If you sell right away at $100 a share, you owe $0 "extra" in taxes.

But if you hold and later sell at $110, you'll owe taxes on the $10 "gain".
Ahh makes sense. Thank you
To add details to this with regard to my experience. The banking company (my nickname for them is UBScrewed or WeFU) that manages the RSUs for my company does not report the cost basis of the RSU. And so I have to modify the automated data input of my tax preparation software and manually massage that cost basis into it. Then eventually I would get a tax bill with an automation response that says the IRS states the value from UBScrewed is different from what you reported so you get a fee, now pay us. I've always had tax issues with RSU and SSAR. I think that my coworkers were unknowingly double paying double taxes by not putting in the cost basis while I knowingly paid double taxes (cause I just ain't smart enough). Anyways, I would reccomend to sell a small first batch to see the details. But the problem is, you won't receive an IRS letter until 3 years later if you made a mistake.

Our HR at headquarters asked UBScrewed why they don't report the cost basis. They figuratively just shrugged their shoulders and slowly lifted a finger (maybe they didn't do that part). They just didn't have an answer. I suspect they viewed it as more work and a big potential mess that could impact their employees taxes adversely.

Some more caveats as I was looking at my old RSU exersale orders.
1) Looks like I also paid Medicare and SS tax on the gains so it looks like ordinary income there.
2) If the RSU pays dividends, the country where the company is at will tax the dividends. So if you want to collect those monies back from that country, you have to fill out detailed paperwork to collect those taxes.

Sell the RSUs just because of 1) above. If you want to stay vested in the company buy the stock in the US market and avoid paying the extra taxes (Medicare and SS).
Sounds like you may be filling out your taxes wrong. I have received RSUs for years without reported basis and corrected it without issue. Also, you should not be paying payroll/FICA taxes on gains after vesting.

You must be thrilled with the issues related to ESPP if you have that, as the basis is required by law to be reported incorrectly to the IRS.
AnEngineer
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Re: General consensus when RSU’s vest?

Post by AnEngineer »

Marseille07 wrote: Sat Sep 18, 2021 1:41 pm
GreendaleCC wrote: Sat Sep 18, 2021 1:35 pm Exactly. Ask yourself, “If I had $[vested RSU amount in dollars] in cash, would I invest it in my employer’s stock?” If the answer is no, problem solved. Sell.
I hear this a lot but the logic is flawed.

Suppose I send you a gift of a Swiss watch, worth 10K. Unless you're a watchnerd, if you ask youself "if I had 10K in cash, would I buy the watch" the answer is probably a no. Does that mean you should sell my gift right away and index the proceeds?
Yes, it does (though I may put the money somewhere else). Also, one should consider the cost of selling (may be $10k new but less "used", does not apply to RSUs). Also, I should factor the value of keeping gifts. I don't know you, so I'd put this at zero, but if it came from family or a friend that value could be high. Again, this does not apply to RSUs.

Now, if I did want to buy such a watch and got one as a gift (your situation with RSUs), I'd just keep it obviously.
DSBH
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Re: General consensus when RSU’s vest?

Post by DSBH »

rage_phish wrote: Sat Sep 18, 2021 11:14 am I have been interviewing at a good deal of tech companies. Most offer RSU’s as part of total comp. ballpark of $40-50k, vested over 4 years

What’s the general consensus for vested RSU?

Sell? Hold? Or is it way to dependent on the company?

I don’t own any individual stock currently. My current company alita a very small amount of RSU’s (like $1000 a year). I have sold those as they vested to help fund my roth
Depending on your view of the company. During my working life my megacorp wasn't a highly stable (imho) company, so I sold them. FWIW treating these stock awards as money we would not normally expect, we use the proceeds to build up our Taxable account by buying all in VG Total Stock Index.
John C. Bogle: "Never confuse genius with luck and a bull market".
hachiko
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Re: General consensus when RSU’s vest?

Post by hachiko »

knowledge wrote: Sat Sep 18, 2021 3:26 pm It would be an interesting to see answers to this question through the years. 10x returns from folks that work at FAANGs can skew consensus. Whereas in March 2009 no one would advise holding.

I still think diversify and sell, but don't fault anyone if they're holding a small portion of their AA in their employee stock, say < 5%.
Just remember to include unvested RSUs in your allocation percentages because you are still exposed to both risk and upside through those holdings. Assuming a very small risk of being fired without them releasing your stock (which is generally the case for most professionals outside of the finance fields), you should include unvested stock in your AA because if the company fails, you lose that, if it shoots through the roof, you'd likely stay in order to vest. If it doesn't go anywhere, then the fact that you reduced your vested holdings in the company because you counted unvested holdings has no effect on your finances.
Made money. Lost money. Learned to stop counting.
quattro73
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Re: General consensus when RSU’s vest?

Post by quattro73 »

Feel a little stuck in mine. Community bank, low ranking member of executive management team. Long blackout periods.

I am going to start selling at some point this coming year to get properly diversified.
SnowBog
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Re: General consensus when RSU’s vest?

Post by SnowBog »

hachiko wrote: Sat Sep 18, 2021 5:48 pm
knowledge wrote: Sat Sep 18, 2021 3:26 pm It would be an interesting to see answers to this question through the years. 10x returns from folks that work at FAANGs can skew consensus. Whereas in March 2009 no one would advise holding.

I still think diversify and sell, but don't fault anyone if they're holding a small portion of their AA in their employee stock, say < 5%.
Just remember to include unvested RSUs in your allocation percentages because you are still exposed to both risk and upside through those holdings. Assuming a very small risk of being fired without them releasing your stock (which is generally the case for most professionals outside of the finance fields), you should include unvested stock in your AA because if the company fails, you lose that, if it shoots through the roof, you'd likely stay in order to vest. If it doesn't go anywhere, then the fact that you reduced your vested holdings in the company because you counted unvested holdings has no effect on your finances.
I'll take the opposite view...

No matter how much unvested stock I have, it is worth exactly $0 until it vests. (The same is true for people that think they'll get an inheritance, until it's in your name it's worth $0.)

So I do not count either in my portfolio or my AA, or even in my "exposure" to the company.

Now, it factors into my interest to stay or leave my employer...
Last edited by SnowBog on Sat Sep 18, 2021 7:40 pm, edited 1 time in total.
hachiko
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Re: General consensus when RSU’s vest?

Post by hachiko »

SnowBog wrote: Sat Sep 18, 2021 6:30 pm
hachiko wrote: Sat Sep 18, 2021 5:48 pm
knowledge wrote: Sat Sep 18, 2021 3:26 pm It would be an interesting to see answers to this question through the years. 10x returns from folks that work at FAANGs can skew consensus. Whereas in March 2009 no one would advise holding.

I still think diversify and sell, but don't fault anyone if they're holding a small portion of their AA in their employee stock, say < 5%.
Just remember to include unvested RSUs in your allocation percentages because you are still exposed to both risk and upside through those holdings. Assuming a very small risk of being fired without them releasing your stock (which is generally the case for most professionals outside of the finance fields), you should include unvested stock in your AA because if the company fails, you lose that, if it shoots through the roof, you'd likely stay in order to vest. If it doesn't go anywhere, then the fact that you reduced your vested holdings in the company because you counted unvested holdings has no effect on your finances.
I'll take the opposite view...

No matter how much invested stock I have, it is worth exactly $0 until it vests. (The same is true for people that think they'll get an inheritance, until it's in your name it's worth $0.)

So I do not count either in my portfolio or my AA, or even in my "exposure" to the company.

Now, it factors into my interest to stay or leave my employer...
Everyone is of course entitled to how they want to run their finances and there's no "wrong" answer. But if you don't include unvested stock in your calculation of exposure to the company's success or failure then you will understate your exposure to the company (by definition). If you are actually at risk of losing your job without them releasing your stock or a new employer making you whole (other than due to the failure or faltering of the company as a whole), then it may make sense to heavily discount the exposure. But this is not the case for most.

That said, in most publicly traded companies and even late stage startups, for most people here the restricted stock based compensation is not going to make up a high enough percentage of one's portfolio to really spend any time doing heavy analysis which is why I agree with you that it makes complete sense to assign no value as a practical matter
Made money. Lost money. Learned to stop counting.
CletusCaddy
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Re: General consensus when RSU’s vest?

Post by CletusCaddy »

hachiko wrote: Sat Sep 18, 2021 7:18 pm
SnowBog wrote: Sat Sep 18, 2021 6:30 pm
hachiko wrote: Sat Sep 18, 2021 5:48 pm
knowledge wrote: Sat Sep 18, 2021 3:26 pm It would be an interesting to see answers to this question through the years. 10x returns from folks that work at FAANGs can skew consensus. Whereas in March 2009 no one would advise holding.

I still think diversify and sell, but don't fault anyone if they're holding a small portion of their AA in their employee stock, say < 5%.
Just remember to include unvested RSUs in your allocation percentages because you are still exposed to both risk and upside through those holdings. Assuming a very small risk of being fired without them releasing your stock (which is generally the case for most professionals outside of the finance fields), you should include unvested stock in your AA because if the company fails, you lose that, if it shoots through the roof, you'd likely stay in order to vest. If it doesn't go anywhere, then the fact that you reduced your vested holdings in the company because you counted unvested holdings has no effect on your finances.
I'll take the opposite view...

No matter how much invested stock I have, it is worth exactly $0 until it vests. (The same is true for people that think they'll get an inheritance, until it's in your name it's worth $0.)

So I do not count either in my portfolio or my AA, or even in my "exposure" to the company.

Now, it factors into my interest to stay or leave my employer...
Everyone is of course entitled to how they want to run their finances and there's no "wrong" answer. But if you don't include unvested stock in your calculation of exposure to the company's success or failure then you will understate your exposure to the company (by definition). If you are actually at risk of losing your job without them releasing your stock or a new employer making you whole (other than due to the failure or faltering of the company as a whole), then it may make sense to heavily discount the exposure. But this is not the case for most.

That said, in most publicly traded companies and even late stage startups, for most people here the restricted stock based compensation is not going to make up a high enough percentage of one's portfolio to really spend any time doing heavy analysis which is why I agree with you that it makes complete sense to assign no value as a practical matter
I vest $300k/yr in RSUs and I think what you are saying makes zero sense.

Do you count unearned future base salary in your AA as well?
shess
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Re: General consensus when RSU’s vest?

Post by shess »

Marseille07 wrote: Sat Sep 18, 2021 1:41 pm
GreendaleCC wrote: Sat Sep 18, 2021 1:35 pm Exactly. Ask yourself, “If I had $[vested RSU amount in dollars] in cash, would I invest it in my employer’s stock?” If the answer is no, problem solved. Sell.
I hear this a lot but the logic is flawed.

Suppose I send you a gift of a Swiss watch, worth 10K. Unless you're a watchnerd, if you ask youself "if I had 10K in cash, would I buy the watch" the answer is probably a no. Does that mean you should sell my gift right away and index the proceeds?
Someone close to me once bought me an expensive watch. It honestly is not my style, and they did not take my heavy hinting about returning it. So now I have an expensive watch in a drawer because I don't want to offend this person, and I 100% would prefer to have a different watch or the cash.

Anyhow, I don't think that's a good comparison, because a watch is a specific identifiable item. A better comparison is that your uncle died and left you $100k in CAT, which was his first employer and which he had held for a 40x gain. Due to the basis step-up, your basis is $100k. So, would you prefer to hold that CAT position for sentimental reasons, because your uncle was such a great guy? Or would you cash it out and reinvest in your preferred 3-fund portfolio?

Or, perhaps the relationship is a problem. Let's say you sign up for a Tastyworks account and they gift you 100 shares worth of some random stock. Are you going to keep those shares, because they were a gift?

Personally, I think you should decide how much of your company you prefer to own, and then you should simply go out and buy that amount. Then flip your vesting non-qualified options and RSUs as they vest. I can see why one might think they'd like to own part of their employer, but I have no idea how you make a solid argument that the right amount and timing is in any way related to the random dates and share amounts on your vesting schedule. Actively decide what you want and then actively acquire that amount, and then flip the rest. If you aren't willing to drop cash up front on your company stock, but you are willing to hold the shares resulting from RSUs vesting, then in my opinion you are letting emotions sway your decision.
SnowBog
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Re: General consensus when RSU’s vest?

Post by SnowBog »

hachiko wrote: Sat Sep 18, 2021 7:18 pm Everyone is of course entitled to how they want to run their finances and there's no "wrong" answer. But if you don't include unvested stock in your calculation of exposure to the company's success or failure then you will understate your exposure to the company (by definition).
Agreed, it is "personal finance" after all!

While I understand what you are saying, I guess I don't view it differently than unpaid salary. Again RSUs are essentially just part of your pay - just in an initial non-cash format.

Let's say I have $100k unvested stock that vests over 4 years (and maybe averages $35k+/year with growth, so over 4 years pays out maybe $150k on average). And my annual salary is $100k, or over 4 years $400k (plus pay raises).

From my view, none of those numbers has anything to do with my portfolio (other than potentially my savings rate going forward). I can't imagine doing or thinking any differently if my portfolio was $1M with $0 in employer stock or $2M with $200k in employer stock. My unvested stock doesn't change my portfolio size, or how much of my portfolio is invested in my employer.

Now if my employer stock is doing poorly, obviously that means I'll "make less money" as the RSU vests will be for less and less and less. And at some point, my job may likely be at risk as well. But assuming this isn't a systemic (or rapidly developed) problem, I'd ideally be looking for other jobs before that point. As I look at other jobs, ideally I'd find one that is as good or better than what I'm leaving.

And conversely, if my company stock is doing very well, those so called "Golden Handcuffs" are doing their job! As I'd be hard pressed to find another organization willing to pay me what I'm making in "total compensation" (unless their stock was likely to do even better).

So while I can see it having an impact on how I think about staying or leaving, I still don't see how it impacts my portfolio or AA.

But to each their own! :beer
fortunefavored
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Re: General consensus when RSU’s vest?

Post by fortunefavored »

CletusCaddy wrote: Sat Sep 18, 2021 7:51 pm
hachiko wrote: Sat Sep 18, 2021 7:18 pm
SnowBog wrote: Sat Sep 18, 2021 6:30 pm
hachiko wrote: Sat Sep 18, 2021 5:48 pm
knowledge wrote: Sat Sep 18, 2021 3:26 pm It would be an interesting to see answers to this question through the years. 10x returns from folks that work at FAANGs can skew consensus. Whereas in March 2009 no one would advise holding.

I still think diversify and sell, but don't fault anyone if they're holding a small portion of their AA in their employee stock, say < 5%.
Just remember to include unvested RSUs in your allocation percentages because you are still exposed to both risk and upside through those holdings. Assuming a very small risk of being fired without them releasing your stock (which is generally the case for most professionals outside of the finance fields), you should include unvested stock in your AA because if the company fails, you lose that, if it shoots through the roof, you'd likely stay in order to vest. If it doesn't go anywhere, then the fact that you reduced your vested holdings in the company because you counted unvested holdings has no effect on your finances.
I'll take the opposite view...

No matter how much invested stock I have, it is worth exactly $0 until it vests. (The same is true for people that think they'll get an inheritance, until it's in your name it's worth $0.)

So I do not count either in my portfolio or my AA, or even in my "exposure" to the company.

Now, it factors into my interest to stay or leave my employer...
Everyone is of course entitled to how they want to run their finances and there's no "wrong" answer. But if you don't include unvested stock in your calculation of exposure to the company's success or failure then you will understate your exposure to the company (by definition). If you are actually at risk of losing your job without them releasing your stock or a new employer making you whole (other than due to the failure or faltering of the company as a whole), then it may make sense to heavily discount the exposure. But this is not the case for most.

That said, in most publicly traded companies and even late stage startups, for most people here the restricted stock based compensation is not going to make up a high enough percentage of one's portfolio to really spend any time doing heavy analysis which is why I agree with you that it makes complete sense to assign no value as a practical matter
I vest $300k/yr in RSUs and I think what you are saying makes zero sense.

Do you count unearned future base salary in your AA as well?
I used to tell this story pretty regularly at work, to people who hadn't worked through 2008:

At the time I was working for a megacorp that was incredibly profitable and successful. Not a massive growth stock, but plenty of profits every quarter. The stock price pretty much hovered around $60 and hadn't missed a bonus payout in a decade.

When 2008/2009 hit, this company was in an industry that benefited from the crash. They literally made more profit and earnings than ever before, every quarter.

However, due to general stock market sentiment.. the stock price went from $60 to $12. It did not recover for 2 or 3 years.

So I agree entirely discounting RSU is a poor idea, actually counting on them to continue to be stable (or go up) is dangerous - even for a "successful, can't lose!" company. Everyone will need to apply their own level of discounting to their RSU based on their comfort level.
AnEngineer
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Re: General consensus when RSU’s vest?

Post by AnEngineer »

hachiko wrote: Sat Sep 18, 2021 7:18 pm
SnowBog wrote: Sat Sep 18, 2021 6:30 pm
hachiko wrote: Sat Sep 18, 2021 5:48 pm
knowledge wrote: Sat Sep 18, 2021 3:26 pm It would be an interesting to see answers to this question through the years. 10x returns from folks that work at FAANGs can skew consensus. Whereas in March 2009 no one would advise holding.

I still think diversify and sell, but don't fault anyone if they're holding a small portion of their AA in their employee stock, say < 5%.
Just remember to include unvested RSUs in your allocation percentages because you are still exposed to both risk and upside through those holdings. Assuming a very small risk of being fired without them releasing your stock (which is generally the case for most professionals outside of the finance fields), you should include unvested stock in your AA because if the company fails, you lose that, if it shoots through the roof, you'd likely stay in order to vest. If it doesn't go anywhere, then the fact that you reduced your vested holdings in the company because you counted unvested holdings has no effect on your finances.
I'll take the opposite view...

No matter how much invested stock I have, it is worth exactly $0 until it vests. (The same is true for people that think they'll get an inheritance, until it's in your name it's worth $0.)

So I do not count either in my portfolio or my AA, or even in my "exposure" to the company.

Now, it factors into my interest to stay or leave my employer...
Everyone is of course entitled to how they want to run their finances and there's no "wrong" answer. But if you don't include unvested stock in your calculation of exposure to the company's success or failure then you will understate your exposure to the company (by definition). If you are actually at risk of losing your job without them releasing your stock or a new employer making you whole (other than due to the failure or faltering of the company as a whole), then it may make sense to heavily discount the exposure. But this is not the case for most.

That said, in most publicly traded companies and even late stage startups, for most people here the restricted stock based compensation is not going to make up a high enough percentage of one's portfolio to really spend any time doing heavy analysis which is why I agree with you that it makes complete sense to assign no value as a practical matter
I get what you're saying for the upside potential, as unvested shares may drive you to hold less than you would otherwise. However, there's no need to consider the downside potential. If you count unvested RSUs at $0 you can't end up worse than that.
Marseille07
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Re: General consensus when RSU’s vest?

Post by Marseille07 »

shess wrote: Sat Sep 18, 2021 7:54 pm Someone close to me once bought me an expensive watch. It honestly is not my style, and they did not take my heavy hinting about returning it. So now I have an expensive watch in a drawer because I don't want to offend this person, and I 100% would prefer to have a different watch or the cash.

Anyhow, I don't think that's a good comparison, because a watch is a specific identifiable item. A better comparison is that your uncle died and left you $100k in CAT, which was his first employer and which he had held for a 40x gain. Due to the basis step-up, your basis is $100k. So, would you prefer to hold that CAT position for sentimental reasons, because your uncle was such a great guy? Or would you cash it out and reinvest in your preferred 3-fund portfolio?

Or, perhaps the relationship is a problem. Let's say you sign up for a Tastyworks account and they gift you 100 shares worth of some random stock. Are you going to keep those shares, because they were a gift?

Personally, I think you should decide how much of your company you prefer to own, and then you should simply go out and buy that amount. Then flip your vesting non-qualified options and RSUs as they vest. I can see why one might think they'd like to own part of their employer, but I have no idea how you make a solid argument that the right amount and timing is in any way related to the random dates and share amounts on your vesting schedule. Actively decide what you want and then actively acquire that amount, and then flip the rest. If you aren't willing to drop cash up front on your company stock, but you are willing to hold the shares resulting from RSUs vesting, then in my opinion you are letting emotions sway your decision.
Yeah it's not easy to come up with a good analogy. As far as I can see, I think the decision comes down to how urgently you want to cash out vs holding the shares. And it's a personal choice.

In case of your uncle passing & CAT shares, it's "medium" level of urgency imo; CAT is not a terrible stock to own. I don't go out and buy extra CAT shares with my own money, but I actually own CAT via S&P500.

Tastyworks bonus shares on the other hand, we *know* those are garbage stocks. Besides, those shares are given in the form of a sign-up bonus, so there's a strong incentive to cash out as soon as you can and pocket the proceeds.

As far as RSUs, I think the answer really "depends." Personally, I always do a trailing stop and this has worked fairly well. But I also understand that given the nature of BHs, the majority of posters would recommend to cash out immediately and index.
HawkeyePierce
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Re: General consensus when RSU’s vest?

Post by HawkeyePierce »

I sell my RSUs as soon as they vest. Mine are about 60% of my compensation. No regrets, given how volatile my employer's stock has been. In the time I've been here, we've been anywhere between $12 and $90.

That said, I just did the math and had I not sold anything, they'd now be worth $1.6m which is far more than I've gotten from selling upon vest.
hachiko
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Re: General consensus when RSU’s vest?

Post by hachiko »

CletusCaddy wrote: Sat Sep 18, 2021 7:51 pm
hachiko wrote: Sat Sep 18, 2021 7:18 pm
SnowBog wrote: Sat Sep 18, 2021 6:30 pm
hachiko wrote: Sat Sep 18, 2021 5:48 pm
knowledge wrote: Sat Sep 18, 2021 3:26 pm It would be an interesting to see answers to this question through the years. 10x returns from folks that work at FAANGs can skew consensus. Whereas in March 2009 no one would advise holding.

I still think diversify and sell, but don't fault anyone if they're holding a small portion of their AA in their employee stock, say < 5%.
Just remember to include unvested RSUs in your allocation percentages because you are still exposed to both risk and upside through those holdings. Assuming a very small risk of being fired without them releasing your stock (which is generally the case for most professionals outside of the finance fields), you should include unvested stock in your AA because if the company fails, you lose that, if it shoots through the roof, you'd likely stay in order to vest. If it doesn't go anywhere, then the fact that you reduced your vested holdings in the company because you counted unvested holdings has no effect on your finances.
I'll take the opposite view...

No matter how much invested stock I have, it is worth exactly $0 until it vests. (The same is true for people that think they'll get an inheritance, until it's in your name it's worth $0.)

So I do not count either in my portfolio or my AA, or even in my "exposure" to the company.

Now, it factors into my interest to stay or leave my employer...
Everyone is of course entitled to how they want to run their finances and there's no "wrong" answer. But if you don't include unvested stock in your calculation of exposure to the company's success or failure then you will understate your exposure to the company (by definition). If you are actually at risk of losing your job without them releasing your stock or a new employer making you whole (other than due to the failure or faltering of the company as a whole), then it may make sense to heavily discount the exposure. But this is not the case for most.

That said, in most publicly traded companies and even late stage startups, for most people here the restricted stock based compensation is not going to make up a high enough percentage of one's portfolio to really spend any time doing heavy analysis which is why I agree with you that it makes complete sense to assign no value as a practical matter
I vest $300k/yr in RSUs and I think what you are saying makes zero sense.

Do you count unearned future base salary in your AA as well?
First, if you vest a dollar amount per year, then your scenario is not what I'm talking about because you aren't exposed to any downside or upside between the grant to vest period. I also don't know how an RSU award could vest based on the dollar amount, but I suppose anything can be done.

Second, I count future salary in my risk analysis. Do you not? If you are weighing job offers for example, the health of the company (i.e. the likelihood that they can continue to pay me) is a large factor. It factors into risk.

Put simply: in which scenario are you more exposed to the failure of company A

Scenario 1: you own 100 shares of company A and are employed by unrelated company B

Scenario 2: you own 100 shares of company A and are employed by company A

The reason the answer is scenario 2 is because of future salary. So yes, if you're trying to manage risk and your exposure to a company, you would own fewer shares of that company if your future salary is tied to that company. That's why future salary (and unvested stock comp) factors into your AA.

Put another way, if you want exposure to the upside of 100 shares of company A and you have unvested RSUs representing 80 shares of company A, do you buy 100 shares? Or do you buy fewer? The answer is: you buy fewer. Probably not 80 fewer, but still fewer.
Made money. Lost money. Learned to stop counting.
AnEngineer
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Re: General consensus when RSU’s vest?

Post by AnEngineer »

Marseille07 wrote: Sat Sep 18, 2021 8:57 pm
shess wrote: Sat Sep 18, 2021 7:54 pm Someone close to me once bought me an expensive watch. It honestly is not my style, and they did not take my heavy hinting about returning it. So now I have an expensive watch in a drawer because I don't want to offend this person, and I 100% would prefer to have a different watch or the cash.

Anyhow, I don't think that's a good comparison, because a watch is a specific identifiable item. A better comparison is that your uncle died and left you $100k in CAT, which was his first employer and which he had held for a 40x gain. Due to the basis step-up, your basis is $100k. So, would you prefer to hold that CAT position for sentimental reasons, because your uncle was such a great guy? Or would you cash it out and reinvest in your preferred 3-fund portfolio?

Or, perhaps the relationship is a problem. Let's say you sign up for a Tastyworks account and they gift you 100 shares worth of some random stock. Are you going to keep those shares, because they were a gift?

Personally, I think you should decide how much of your company you prefer to own, and then you should simply go out and buy that amount. Then flip your vesting non-qualified options and RSUs as they vest. I can see why one might think they'd like to own part of their employer, but I have no idea how you make a solid argument that the right amount and timing is in any way related to the random dates and share amounts on your vesting schedule. Actively decide what you want and then actively acquire that amount, and then flip the rest. If you aren't willing to drop cash up front on your company stock, but you are willing to hold the shares resulting from RSUs vesting, then in my opinion you are letting emotions sway your decision.
Yeah it's not easy to come up with a good analogy. As far as I can see, I think the decision comes down to how urgently you want to cash out vs holding the shares. And it's a personal choice.

In case of your uncle passing & CAT shares, it's "medium" level of urgency imo; CAT is not a terrible stock to own. I don't go out and buy extra CAT shares with my own money, but I actually own CAT via S&P500.

Tastyworks bonus shares on the other hand, we *know* those are garbage stocks. Besides, those shares are given in the form of a sign-up bonus, so there's a strong incentive to cash out as soon as you can and pocket the proceeds.

As far as RSUs, I think the answer really "depends." Personally, I always do a trailing stop and this has worked fairly well. But I also understand that given the nature of BHs, the majority of posters would recommend to cash out immediately and index.
There are two separate considerations
1) if I want to hold shares of my employer
2) if I should hold those shares BECAUSE I got RSUs

You seem to be focusing on 1, while I and others are focusing on 2. While I and most bogleheads advise against 1 ( though I think holding ESPP shares can make since because you have an actual advantage compared to the market because of tax treatment), I could see arguments that your company stock is worth it. However, I do not see any reason to support 2 now that trading costs are non-existent.

If you're literally just talking about urgency, in the sense of do you make sure you sell RSUs at the earliest possible moment as opposed to within a day or two of vesting, sure, because there you're taking into account the time cost of focusing on selling and not the rest of your life. But holding for that kind of time frame isn't really worth much discussion.
m@ver1ck
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Re: General consensus when RSU’s vest?

Post by m@ver1ck »

FWIW - I held on to all MSFT RSUs and ESPPs, selling only when I needed cash.
Every time I’ve diversified, I’ve done worse.
However, there is risk - and taking the risk has paid off.

There is risk - and there is opportunity- don’t look just at the one and not the other.
jharkin
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Re: General consensus when RSU’s vest?

Post by jharkin »

I always sold RSUs immediately on vest when I worked for a public company. Before the age of RSUs I did the same for nonqual options as well (assuming in the money). I also sold ESPP shares as soon as could.

Never regretted it. The first time you live though a Great Recession/dot com/Black Monday like market you will understand why.
BogleFan510
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Re: General consensus when RSU’s vest?

Post by BogleFan510 »

fortunefavored wrote: Sat Sep 18, 2021 3:49 pm
TomatoTomahto wrote: Sat Sep 18, 2021 3:40 pm
fortunefavored wrote: Sat Sep 18, 2021 2:03 pm As someone who was involved in many "potentially company ending" issues at Fortune 500 companies.. there is no scenario I would ever hold onto RSU. Sell them like a hot potato. These were issues where it was "eyes only" with executives and limited teams - everyone put immediately into scary sounding supplemental NDAs, trading freezes, etc. I'd say maybe 1 out of 20 were eventually shared publicly.

You know nothing. If you do know something, you should be on a planned sale plan like execs to avoid insider trading accusations.
I once worked with a CIO who thought he knew something. He had enough, but was greedy. When the company died, it was too late for him to sell at better than pennies on what had been many dollars. Being an insider isn’t always enough.

I knew him at his subsequent job, which he never really adjusted to. He was a really nice guy. I lost track of him after he lost that job.
Right, even if you know.. the asymmetric risk/reward of holding a single stock is not worth it. Yes, that has been utterly wrong advice for FANGM the past few years, but you can be lucky with a bad strategy. I assume all the 100% (or more) equity folks will be in the same category if we hit a 15 or 20 year secular bear.
I dissagree with this. The asymetric risk is asymetric risk, not a lower expected value. On average a stock will perform at the average of the market, so as part of a balanced portfolio they fit fine IMHO. Obviously the volatility is likely higher, but there can be upside for careful choices. Personally, Ive had at least 3 50x performers and while i kept them a small percent of my portfolio for risk management purposes, they allowed our portfolio to outperform expected returns by over $1M.

So the risk can be worth it, one just needs to do so on an informed basis. In terms of holding a company one works for, that represents a concentration of risk I would suggest avoiding. Losing a job and savings is a double hit. Ive also held stocks in several companies with very good market positions and strategies that went BQ. That is the nature of individual stocks, especially aggressive growth plays, which tend to be the attractive ones.
Marseille07
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Re: General consensus when RSU’s vest?

Post by Marseille07 »

jharkin wrote: Sun Sep 19, 2021 9:29 am I always sold RSUs immediately on vest when I worked for a public company. Before the age of RSUs I did the same for nonqual options as well (assuming in the money). I also sold ESPP shares as soon as could.

Never regretted it. The first time you live though a Great Recession/dot com/Black Monday like market you will understand why.
The choices aren't sell immediately or hold forever. I'm in the "hold" camp but I do have a trailing stop and would exit immediately if triggered.
MotoTrojan
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Re: General consensus when RSU’s vest?

Post by MotoTrojan »

An RSU at a public company should be thought of as a cash-bonus and nothing more. If you got a cash-bonus instead, and immediately invested it into the companies stock, that would be in no ways different (taxes included) from taking an RSU and not selling it.

Don't let emotions mix-up what you are really getting. If you would buy the stock with a cash-bonus, then leave it invested. If not, sell as soon as it vests.
Reamus294
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Re: General consensus when RSU’s vest?

Post by Reamus294 »

My spouse’s last company was relatively flat so there was some money lost by holding. My spouse’s current company has much more potential/risk due to the industry and she received more RSUs. We sold the first round but will likely take the approach of selling 1/3 to reinvest, selling 1/3 to fund home projects, leaving 1/3. I do not count the RSUs in my retirement calculations (asset allocation and expected funds at retirement) until they are sold and reinvested into an index.
We also participate in the ESPP with a discount that requires a 1 year hold. The plan is to sell to reinvest in an index after eligible for long term gains. These, I do count in retirement calculations whenever the stock purchase happens, which isn’t consistent with the RSUs.
This works for us and we have flexibility right now. This will likely change as we get closer to retirement. We know this is more risky that selling immediately and it is a risk we are currently willing to accept. I am preparing mentally for a big drop to help define some more rules which will become more important as more shares become eligible to sell.
fortunefavored
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Re: General consensus when RSU’s vest?

Post by fortunefavored »

BogleFan510 wrote: Sun Sep 19, 2021 9:37 am
fortunefavored wrote: Sat Sep 18, 2021 3:49 pm
TomatoTomahto wrote: Sat Sep 18, 2021 3:40 pm
fortunefavored wrote: Sat Sep 18, 2021 2:03 pm As someone who was involved in many "potentially company ending" issues at Fortune 500 companies.. there is no scenario I would ever hold onto RSU. Sell them like a hot potato. These were issues where it was "eyes only" with executives and limited teams - everyone put immediately into scary sounding supplemental NDAs, trading freezes, etc. I'd say maybe 1 out of 20 were eventually shared publicly.

You know nothing. If you do know something, you should be on a planned sale plan like execs to avoid insider trading accusations.
I once worked with a CIO who thought he knew something. He had enough, but was greedy. When the company died, it was too late for him to sell at better than pennies on what had been many dollars. Being an insider isn’t always enough.

I knew him at his subsequent job, which he never really adjusted to. He was a really nice guy. I lost track of him after he lost that job.
Right, even if you know.. the asymmetric risk/reward of holding a single stock is not worth it. Yes, that has been utterly wrong advice for FANGM the past few years, but you can be lucky with a bad strategy. I assume all the 100% (or more) equity folks will be in the same category if we hit a 15 or 20 year secular bear.
I dissagree with this. The asymetric risk is asymetric risk, not a lower expected value. On average a stock will perform at the average of the market, so as part of a balanced portfolio they fit fine IMHO. Obviously the volatility is likely higher, but there can be upside for careful choices. Personally, Ive had at least 3 50x performers and while i kept them a small percent of my portfolio for risk management purposes, they allowed our portfolio to outperform expected returns by over $1M.

So the risk can be worth it, one just needs to do so on an informed basis. In terms of holding a company one works for, that represents a concentration of risk I would suggest avoiding. Losing a job and savings is a double hit. Ive also held stocks in several companies with very good market positions and strategies that went BQ. That is the nature of individual stocks, especially aggressive growth plays, which tend to be the attractive ones.
That's fine because you have chosen this as your strategy and you follow it. Many people in this thread are holding their RSU and no other individual stock. That makes no sense to me.
BogleFan510
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Re: General consensus when RSU’s vest?

Post by BogleFan510 »

fortunefavored wrote: Sun Sep 19, 2021 11:58 am
BogleFan510 wrote: Sun Sep 19, 2021 9:37 am
fortunefavored wrote: Sat Sep 18, 2021 3:49 pm
TomatoTomahto wrote: Sat Sep 18, 2021 3:40 pm
fortunefavored wrote: Sat Sep 18, 2021 2:03 pm As someone who was involved in many "potentially company ending" issues at Fortune 500 companies.. there is no scenario I would ever hold onto RSU. Sell them like a hot potato. These were issues where it was "eyes only" with executives and limited teams - everyone put immediately into scary sounding supplemental NDAs, trading freezes, etc. I'd say maybe 1 out of 20 were eventually shared publicly.

You know nothing. If you do know something, you should be on a planned sale plan like execs to avoid insider trading accusations.
I once worked with a CIO who thought he knew something. He had enough, but was greedy. When the company died, it was too late for him to sell at better than pennies on what had been many dollars. Being an insider isn’t always enough.

I knew him at his subsequent job, which he never really adjusted to. He was a really nice guy. I lost track of him after he lost that job.
Right, even if you know.. the asymmetric risk/reward of holding a single stock is not worth it. Yes, that has been utterly wrong advice for FANGM the past few years, but you can be lucky with a bad strategy. I assume all the 100% (or more) equity folks will be in the same category if we hit a 15 or 20 year secular bear.
I dissagree with this. The asymetric risk is asymetric risk, not a lower expected value. On average a stock will perform at the average of the market, so as part of a balanced portfolio they fit fine IMHO. Obviously the volatility is likely higher, but there can be upside for careful choices. Personally, Ive had at least 3 50x performers and while i kept them a small percent of my portfolio for risk management purposes, they allowed our portfolio to outperform expected returns by over $1M.

So the risk can be worth it, one just needs to do so on an informed basis. In terms of holding a company one works for, that represents a concentration of risk I would suggest avoiding. Losing a job and savings is a double hit. Ive also held stocks in several companies with very good market positions and strategies that went BQ. That is the nature of individual stocks, especially aggressive growth plays, which tend to be the attractive ones.
That's fine because you have chosen this as your strategy and you follow it. Many people in this thread are holding their RSU and no other individual stock. That makes no sense to me.
Agreed. Its a crap shoot.

As mentioned have many examples where colleagues or friends or myself who held restricted stock or options that ended up worthless. One friend held over $1M in value that later became a bankruptsy court legal claim. It was like 90% of his NW (I had advised him to diversify out near the peak and he said his returns had been double the market, so...). Not sure what he eventually net received, but it was stressful for their family as the job also ended. Another colleague is a senior exec at a company where the stock is 80x-100x what it was when he first told me he loved the pipeline of products and was joining maybe 15 yrs ago. He diversified as shares vested away from millions, but having risen to be a top tech employee, is still earning 7 figure annual comp from the somewhat reduced stock incentive plans, so the diversification made sense, even if it likely cost him mid 8 figures in wealth.
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mrspock
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Re: General consensus when RSU’s vest?

Post by mrspock »

Some comments:
1. You need to back out taxes. You cannot hold company stock indefinitely.
2. You don’t actually know the outcome of the decision to hold RSUs until the person sells. The stock could rocket to $10m one decade looking like a great move vs maybe $5m for the person who diversified only to be worthless the next decade. It’s the end state that matters not the one I between.
3. The absolute worse thing that can happen is you are “right” in not selling and the stock skyrockets. You will
Be lulled into thinking you can maintain this strategy, or keep holding the stock, only to have very painful experience of losing the majority of your entire net worth.

In short, compare net worth in 20 years or so…. you will find out who made the right calls then, and who didn’t.
GreendaleCC
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Re: General consensus when RSU’s vest?

Post by GreendaleCC »

Marseille07 wrote: Sat Sep 18, 2021 2:05 pm
pasadena wrote: Sat Sep 18, 2021 1:59 pm Your own logic is flawed too. We're talking stocks (RSU) vs stocks (Indexes). So in your example, the question should be "if I had 10k in cash, would I buy this watch, or a different one with different characteristics?", not indexing the proceeds.
Why? The original comparison was (if you had cash X) then buy a company's stock vs indexes. The "cash X" portion doesn't change, whether the X is in RSUs or a watch.
Would you rather receive a $10k watch or $10k of Corn Flakes? Your logic suggests the cash value doesn’t change, whether the $10k is in the form of a watch or Corn Flakes.

Wait, $10k of Corn Flakes would be harder to get rid of and you may not get the full $10k value? That’s how I feel about the comparison of an expensive watch and RSUs.
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