- In October, fintech startup Bolt offered employees full recourse loans to buy shares in the firm.
- Just months later, layoffs at Bolt left some employees on the hook for tens of thousands of dollars.
- A leaked email viewed by Insider shows new repayment options, which are due in less than 90 days.
Financial-technology startup Bolt has offered three options to former employees who were laid off in May after they took out full recourse loans to buy shares in the company, according to an email viewed by Insider.
Bolt started offering traditional recourse loans in October, which let employees borrow money collateralized against their personal assets, so they could exercise their options early. According to a spokesperson for Bolt, the company was funding the loans.
In a long-winded Twitter thread announcing the initiative, the founder and former CEO of Bolt Ryan Breslow hailed it as “the most employee-friendly stock option program possible.” Companies frequently offered employees this option during the dot-com boom, which nearly cost some tech employees their life savings after the subsequent bust. Due to the significant risk it presents to employees, the practice is less widespread today.
One former employee previously told Insider he took out a loan of nearly $100,000 after the company encouraged this new program. Then, after being laid off just months later, he suddenly found himself on the hook to pay back much of the loan within 90 days.
Now the firm is offering to buy back shares at what it says is its most recent private-market valuation of $16.89 a share, according to an email sent on June 16 to laid off employees who had taken out loans to buy shares. In the email, Bolt offered three options for repaying the loans:
Hello former Bolter,
If you’re receiving this note you were both impacted by last month’s restructuring and also had previously chosen to take an interest-free loan from Bolt to exercise or early exercise your stock options.
To the extent you exercised early (before the underlying shares were vested) any loan amount relating to shares that currently remain unvested will be satisfied by Bolt’s repurchase of the unvested shares, with no further obligation from you.
With respect to any remaining loan amount relating to vested shares, the balance is normally due within 30 days of departure, but Bolt’s Board of Directors has already approved a special extension to allow you 90 days to repay this debt.
However, we understand the difficulties presented by an unplanned separation in an unusually challenging macro environment, and that it may not be possible to repay this loan even with additional time. Therefore, we’d like to make you a special offer:
Repay with cash – If you’d like to repay your loan and keep your vested Bolt stock, you may repay the loan by wiring Bolt the funds within the 90 day period.
Repay with stock – If you are unable to repay your loan in cash within 90 days, we will allow you to surrender Bolt shares to repay the loan. The number of shares you would need to surrender would be calculated based on Bolt’s current 409A fair market value price. For example, if the 409A is $16.89 (which represents Bolt’s most recent 409A price), and if you have a $1,689 loan, you would need to surrender 10 vested shares.
Repay with a combination of cash and stock – You may also repay the loan through a combination of cash and surrendered shares, if that is your preference.
Finally, there is uninformed reporting being published suggesting that those impacted by the restructuring are holding loans whose balance exceeds the value of the corresponding stock. This is simply not true. Everyone who is impacted by the restructure and who holds vested options purchased using an exercise loan (including you) purchased their shares at an exercise price below the most recent fair market value, and this means you can repay your loan to Bolt without spending any money out of pocket by surrendering the underlying shares.
You can make your decision any time over the 90 day period, provided that any cash repayment must be received by Bolt before the end of this period. If there is any outstanding balance at the completion of this period, Bolt will assume you intend to surrender shares as described above to satisfy the balance of the loan. Note: If you choose to repay all or a portion of your loan with stock surrendered to the Company, there may be tax consequences with the transfer as it would be treated as a sale. Additionally, the transfer could be deemed a Disqualifying Disposition which would require Bolt to report a portion of the appreciated gain as income on your W-2. If you intend to repay using stock, we can calculate the amount of income to be reported and a general estimate of potential taxes due.
Please take time to consider these alternatives and complete this Special Loan Repayment Option Form to let us know which of the options above works best for you. We also encourage you to discuss these alternatives with your tax advisors because everyone’s tax situation may be slightly different. As always, you may contact me or [redacted email address] with any questions. Thank you again for your contributions to Bolt and best wishes for your next adventure.
Bolt declined to comment.