CEO Eric Yuan Donates 1/3 of His ZM Shares

This caught my eye, but it doesn’t change my stance on the company. Zoom Founder/CEO Eric Yuan donated $6b worth of shares, which the article states was 1/3 of his stake, so presumably he still has a $12b stake in the company.

Said otherwise, he still has 12 billion reasons to be a shareholder friendly CEO. Now, if hypothetically he donated 98% of his shares, I would perhaps be concerned that his interests are less aligned with ours.…


I don’t want to drag us into politics but clearly some folks painting this as a corrupt payment to China. I would bet this is wrong and that the privacy is attempt to protect family members from the massive attacks that will come from every angle on people known to have large fortunes.

In reality this is a non issue.

In perception, the fear that Zoom can’t be fully trusted, could clip the valuation a bit.

But in the end business performance is likely all that matters.


Since we don’t know where he donated his shares everything else is speculation. But I would remind everyone that you don’t donate shares hoping that the entity the shares are donated to fail. You donate shares hoping that you are truly helping the world be a better place.



Actually, you donate the shares to a family foundation run by… “You.” You take the sizable tax write-off, you make plans to pay your family members to administer the charitable foundation, and “You” maintain voting control of the shares.


Hi rtichy,

This is not a charitable trust. He receives NO TAX WRITE-OFF!

He PAYS tax when the trust is setup.

Here is an explanation:

All holdings and some statistics on my Fool profile page


Everytime I read the need for shareholder friendly CEOs I have to cringe.

I don’t want to have a shareholder friendly CEO, I want a long-term thinking CEO that is customer-friendly.

Am I wrong?


I’m working off the word “Donate” right in the subject line, here, Gene.…
“give (money or goods) for a good cause, for example to a charity.”

If the subject is wrong, then I was misled.

[Posted this on the Zoom Board too]

Yahoo reports, “The filings didn’t specify the recipient of the stock, which was owned by a Grantor Retained Annuity Trust, or GRAT, for which Yuan is a trustee.”

Short Answer - this is bullish.

Let me explain what a GRAT is. A GRAT is an estate planning technique where you transfer shares of stock to a trust and retain the right to receive an annuity from the trust for a short term period. Whatever is left in the trust after the annuity payments and is considered the residue. You give away the residue (what’s left at the end) to someone - usually a kid. The gift of the residue is a “taxable gift”. Once you use your gift tax exemption (which Yuan has likely used long ago). You pay gift taxes at the rate of 40% on the fair market value “of the value of the residue at the time of the transfer of the shares to the GRAT.”

So if the shares transferred to the a GRAT is worth $3 billion how much do you think the residue going to be valued at? (Remember he’s paying 40% tax immediately on that residue gift?) The correct answer is zero or near zero. How does that work?

Example, Yuan transfers $3 billion to a GRAT. He retains an annuity of 50.56% for 2 years and the reminder goes to kid #1. So, Yuan gets 2 annual payments of about $1.518 billion each year from the GRAT. These payments will be made in-kind - ZM stock back to Eric Yuan. Using IRS Tables and assuming a current interest rate of .8% return, the value of the gift is about $70,642.26. Eric writes a check for gift taxes for each GRAT of $28,256.80 to the IRS for each trust. If the value of ZM goes up 20% per year, then he effectively transferred close to $1 billion of ZM stock to his kids for $28,256.80. If he just gave his kid $1 billion of ZM he’d pay $400 million in taxes.

If ZM goes up 100% per year, his kids are even richer. No matter what, Eric is getting all of the the $3 billion of ZM stock (plus a bit more) back from each trust.

The downside is if ZM is flat or goes down. Then, Eric wasted $28,256.80 because he got all the the ZM stock back as an annuity, and his kids get nothing. Note, the payment to himself is tax free because the GRAT is ignore for income tax purposes - he is paying himself. Plus, he never sells the stock. He just gets back in-kind shares.

So, when a CEO/Founder transfers stock to a GRAT, with a reminder likely to his kids, it means most of the contributed value of the stock is coming right back to the CEO/Founder over the next two years. (The CEO/Founder gets to continue to vote the stock in the trust too.) The growth of the stock over and above what he puts in mostly goes to the kids - effectively gift tax free.

Welcome to America.



I see this as a bullish sign. Think about it… if I thought my company wasn’t going to do well over the next few years, why would I give away billions in net worth? He must have confidence that his remaining 2/3 of ZM stock will appreciate substantially in the coming years.

Also, knowing Eric’s life story and general demeanor/personality, he doesn’t strike me as a money-hungry, shady, two-faced character. As an investor who has followed ZM closely, I believe in his leadership, integrity and decision making ability. He is committed to Zoom for the long haul. This show is just getting started!

I am long ZM.

  • Ceez