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DoorDash is now a public company. At IPO, shares traded above $180, valuing the company at roughly $60–72 billion.
That’s great for founders, investors, and employees with equity. The share price may move around before they can actually sell their shares (there is the usual lock-up period after an IPO), but at this stage the market is clearly pricing in strong long-term growth potential and significant value for early option holders.
Unfortunately, growth stories like this can be bittersweet when you look at how they affect employee equity, especially stock options.
That works out to roughly $924,643 in potential tax savings per employee who held stock options.
Here’s how that actually breaks down for DoorDash employees and their stock options, and the taxes they faced on those gains:
If after the IPO an employee sells their equity, they are generally taxed on the gains at ordinary income rates if the shares were not held long enough to qualify for long-term capital gains treatment, or at long-term capital gains rates if they meet the holding requirements, with high earners also potentially owing the 3.8% net investment income tax on top once their income exceeds the applicable threshold, according to the IRS (https://www.irs.gov/taxtopics/tc559).
That 37% is because for shares you hold on to for a year, the gain you make counts as long-term capital gains. (By the way, I'm assuming California rates.)
What does that look like for DoorDash? Well if we look into the S1 filing, we learn that:
If we assume the shares sell for $180 per share, then these stock options create a pre-tax gain of $180 - $2.41, or about $178 per share before any federal, state, or AMT taxes are applied. At that price, each option holder is effectively turning a $2.41 purchase into stock worth $180, which is where the large built-in gain and potential tax bill come from.
But what about your after-tax gain? That depends on your combined federal and state tax rates, and on whether your profit is taxed as ordinary income at your top marginal rate or as long-term capital gains, which for high earners can be taxed at up to 23.8% federally before any state taxes are added.
That still works out to a tax savings of about $28 per share by having exercised early, based on the gap between ordinary income rates that can reach roughly 54% for high-earning California employees and an estimated 37% blended long-term capital gains rate, using current federal and California tax assumptions (according to the Tax Foundation, https://taxfoundation.org).
If we multiply that amount by the number of unexercised stock options, there's a total of $954,231,260 in untapped tax savings for employees who could have locked in lower ordinary income rates and shifted more of their upside into long-term capital gains, subject to AMT and NIIT where applicable, with an estimated combined federal and California ordinary income rate of roughly 54% compared with about 37% for long-term capital gains for high earners in California.
That money could have stayed with employees as potential long-term capital gains taxed at rates that often top out around 23.8% federally for high earners, but instead it is now headed to the IRS as ordinary income taxed at rates that can exceed 50% once federal, NIIT, and California state taxes are combined.
DoorDash currently has 3,279 employees. But they stopped awarding stock options (switching to RSUs) in 2018, when they had 1,032 employees. So let’s use 1,032 as our upper bound on the number of stock option holders.
The average DoorDash employee is missing out on $924,643.
Most startup employees never get a clear explanation of the tax tradeoffs around exercising stock options. Companies often try to educate their teams, but the rules around ordinary income tax, long-term capital gains, and AMT are complex and the thresholds and rates are updated regularly by the IRS (https://www.irs.gov). Since exercising options is an investment decision, there is also a limit to how much personalized guidance an employer can legally provide.
Another problem is that many employees do not learn about the tax impact of their stock options until it is too late to do much about it, especially when AMT or high ordinary income rates are already locked in for the year according to the IRS (https://www.irs.gov). What does “too late” actually look like in practice?
Well, the paradox of hyper-growth startups is that as the stock price climbs, exercising stock options can become so expensive from a tax and cash perspective that many employees are effectively priced out.
Say you join DoorDash as an engineer and receive 50,000 incentive stock options (ISOs) with a $1.50 strike price, and you are trying to understand how exercising those options and a future IPO could affect your taxes under today’s rules.
Let’s ignore vesting for simplicity and assume you are able to exercise all of your options right away. Before considering any taxes, you would pay 50,000 × $1.50 per share, for a total exercise cost of $75,000.
Say two years into the job, you consider exercising. Assuming the 409A value (also known as fair market value) is now around $15, exercising would still trigger a large tax bill, with most or all of the $13 spread between your $2 strike price and the $15 fair market value treated as income for tax purposes [NEEDS VERIFICATION: last known total tax bill example was $246,748 for a total cost of $321,748; confirm using current 2025 federal and California rates].
You decide not to exercise your options, which means you avoid an immediate tax bill on the spread but also delay starting the long-term capital gains holding period that could qualify future gains for lower tax rates.
Fast-forward to September 2020. Rumors of an IPO start to spread, and you take another hard look at your ISOs, now with a clearer sense of the potential tax impact if the company actually goes public, including how ordinary income tax, long-term capital gains, and possible AMT exposure could affect your final after-tax outcome.
Now, the 409A value has grown to around $35. This pushes your estimated AMT bill to roughly $596,758, bringing your total exercising costs to about $671,748. [NEEDS VERIFICATION: last known 409A value was $35 and last known AMT and total cost figures were $596,758 and $671,748]
As the IPO approaches, you are told there is a firm cutoff date: a final opportunity to exercise your stock options before DoorDash goes public and your potential tax bill shifts from mostly long-term capital gains toward higher ordinary income rates.
After that deadline, a blackout period begins and you are no longer allowed to exercise your stock options, which means you temporarily lose the ability to turn your equity into shares or cash even if the company’s value continues to rise.
Exercising your ISOs has probably felt out of reach from the start, and steadily rising 409A valuations have only made it more expensive and harder to plan for over time.
So instead, you end up waiting for the IPO and hoping the tax math still works in your favor, even though higher ordinary income rates and AMT risk can quickly erode what you keep from your ISOs.
But that’s a shame because if you exercise at the IPO by selling shares to cover the cost, you won't qualify for long-term capital gains. You have to hold on to your equity for two years after grant and one year after exercise in order to get that preferential tax treatment. This is where the tax savings are forfeited.
Both outcomes are impressive, but a $1.4 million swing in after-tax value can be the difference between simply participating in an IPO and having true long-term financial flexibility.
Even at a cost of about $1.1 million to exercise right before the IPO, that still works out to roughly a 125%–130% net return after estimated federal and California taxes, assuming today’s top combined ordinary income and long-term capital gains rates for high earners in California (based on IRS and California FTB data for the 2025 filing season). Not too shabby.
(Note that the $1.4 million reflects the difference in net gains, so the $1.1 million cost to exercise the ISOs has already been accounted for in that figure. This comparison also assumes today’s typical high-earner tax mix, where ISO gains can be taxed at ordinary income rates of up to about 53–54% in California versus an estimated 37% blended rate when they qualify for long-term capital gains treatment, based on current federal and California rules according to the IRS and the Tax Foundation (https://taxfoundation.org/data/all/federal/latest-federal-income-tax-rates-brackets/).)
We have a culture of employee equity that shows up in how people are hired, paid, and promoted. It feels like we are steadily moving in the right direction.
The equity vehicle of choice at many startups is still the stock option, but it is not without flaws. Paradoxically, the biggest success stories often reveal both the upside of options when a company takes off and the hidden tax and liquidity risks that come with them, especially around AMT exposure and when you choose to exercise.and the worst of how they work when employees are caught off guard by tax bills, short exercise windows, or a falling stock price after they have already locked in income on paper.
So, startup employees: Be intentional about your stock options. Understand how exercising can affect your taxes and your cash flow, including the risk of triggering AMT on ISOs and the gap between ordinary income rates that can reach the high 40s or low 50s in places like California and long-term capital gains rates that typically top out around 23.8% at the federal level for high earners, before state tax (according to the IRS, https://www.irs.gov/taxtopics/tc409). If you are not sure how to navigate this, talk to a qualified tax professional or an equity strategist who works with startup equity. There is often too much money and too much tax exposure on the table to treat it as an afterthought, especially with AMT rules for ISO exercises becoming more complex in 2026.