4 ms·

A low strike price only matters if there is some eventual liquidity for the shares. For common stock this means IPO, acquisition or some other share buyback.

by birken 11y ago

A low strike price only matters if there is some eventual liquidity for the shares. For common stock this means IPO, acquisition or some other share buyback. Both IPOs and acquisitions generally don't apply to companies "treading water", only the extremely successful and growing ones manage to IPO (and even then it doesn't work out so great for shareholders: see YELP or BOX) or get acquired. Get acquired for less than your ultra-inflated valuation? Then the common shareholders get killed by liquidation preferences. And as for other share transactions, you'll need to find a buyer. Most savvy investors aren't going to be willing to pay huge valuation premiums for common stock. And if they aren't going to pay a premium, then you really haven't gained anything by issuing common shares at a lower strike price. So basically, common shares have lower strike prices because they are worth less.... It isn't some magic trick that automatically benefits employees.

pbreit 11y ago
Both YELP and BOX made a lot of people very rich.
- adventured 11y ago
  Box clearly did not make a lot of people very rich. They made a tiny group of people richer (very early investors). Employees have not done well, as the stock has been a disaster. All of the big rounds that Box raised basically valued them at or above where their stock is now. They're worth $1.6 billion and raised $558 million; their last round was at $2.5 billion. Their latest quarter they did $73m in sales and lost $50m, with rapidly slowing growth. Even worse, they're bleeding significantly on an operating basis, implying the business may never be capable of making money. They might be lucky if they have four or five quarters of cash left before disaster hits. The near future returns for employees holding stock, is not likely to be pretty. Even the primary founder didn't get very rich in SV terms, after he had to be diluted down to a sliver of ownership to keep the lights on.
  - pbreit 11y ago
    Even the late stage investors probably made money. The only employees who didnt make money are the handful hired at the very end when the common valuation finally meets up with preferred.
pbreit 11y ago
Any equity compensation depends on future liquidity which unicorns have much more of.

by birken 11y ago

pbreit 11y ago

Both YELP and BOX made a lot of people very rich.

adventured 11y ago
Box clearly did not make a lot of people very rich. They made a tiny group of people richer (very early investors). Employees have not done well, as the stock has been a disaster. All of the big rounds that Box raised basically valued them at or above where their stock is now. They're worth $1.6 billion and raised $558 million; their last round was at $2.5 billion. Their latest quarter they did $73m in sales and lost $50m, with rapidly slowing growth. Even worse, they're bleeding significantly on an operating basis, implying the business may never be capable of making money. They might be lucky if they have four or five quarters of cash left before disaster hits. The near future returns for employees holding stock, is not likely to be pretty. Even the primary founder didn't get very rich in SV terms, after he had to be diluted down to a sliver of ownership to keep the lights on.
- pbreit 11y ago
  Even the late stage investors probably made money. The only employees who didnt make money are the handful hired at the very end when the common valuation finally meets up with preferred.

pbreit 11y ago

Any equity compensation depends on future liquidity which unicorns have much more of.