Dive Brief:
- Ride-hailing service Uber is buying back some of its employees' shares rather than keeping workers waiting for the company's IPO, Bloomberg reports. Staff with at least four years onboard may sell up to 10% of their shares.
- Funds from the sale are paid out over several months, which requires employee sellers to stay onboard throughout the sale, says Bloomberg. Share buy-backs have effectively become a staff retention tactic for the $69 billion startup.
- Tech startups have been slow to go public, according to Bloomberg. The outlet's private market tracking index, the Bloomberg U.S. Startups Barometer, shows that Uber’s stock buy-back strategy cut the rate of employee exits in half.
Dive Insight:
Uber’s retention rate got a big boost from the shares sale, but a high retention record doesn’t necessarily guarantee employee satisfaction. Employees who feel restless and ready to move on to the next opportunity might not think the money is worth the wait.
Fewer than 200 of Uber’s 10,000 workers are eligible to take advantage of the buy-back option. Members of this select group are likely early investors in the company, some of whom have become wealthy, Bloomberg says.
Stock options in general have proven to be a risky strategy for tech startups in the past year. Uber, with its buy-back option, might avoid the perils encountered by Twitter, whose plummeting stock value hurt employees who depended on their shares.