Gurley explains a large investor pushed for zero-based RSUs believing one RSU equals 2.5-3 options to reduce dilution.
“This particular investor in this very large public Internet company felt that if they move to zero based RSUs from options, and this gets into a technical detail around Black Shoals, that, you know, there's an argument from Black Shoals that a single RSU is worth about two and a half or three options.”
Gurley argues zero-based RSUs allow management to capture 80% value while shareholders lose 20%, showing misalignment.
“And here's where we get into questions of alignment with shareholders, because you could theoretically have a management team that leads a company, you know, over a year to a 20% decline and pick up 80% of the value of their equity award.”