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For those more well versed that I in employee stock options, what does this mean for employees with equity options? I assume it's quite dillutive and will make

For those more well versed that I in employee stock options, what does this mean for employees with equity options? I assume it's quite dillutive and will make options granted after last funding round worthless assuming share price stays at ipo price ?

jackgavigan 11y ago
Whether it's dilutive or not isn't as big a deal as what the options' strike price is. If Square has issued options with a strike price based on the Series E share price (which appears to be ~$15.46), then those options are looking like they're going to be under water. It's not unreasonable to assume that the options would be issued at a discount (because they wouldn't have the guaranteed return provisions provided by the ratchet) but there's no way of knowing if that's the case and, if so, what the discount might be.
- branch23 11y ago
  agreed, but the article also mentions that square may have to issue more shares in order to satisfy guarantees it made to investors in previous rounds. How might this affect the financial position of employees with options granted at the series E share price?
  - jackgavigan 11y ago
    The number of shares only matters in so much as (Number of shares) x (Share price) = (Company valuation) Implicitly, if investors take the view that Square is worth a certain amount, then increasing the number of shares will reduce the value of each share. The shares Square will be issuing to its Series E investors are designed to increase the proportion of the company that they own so that, even though the pie is smaller, their piece of the pie remains a certain size. In principle, everyone else's share of the pie is, therefore, smaller and less valuable as a result.
    - jackgavigan 11y ago
      As recently as September, the company [Square] handed out stock options to staff — one of the main perks of jobs in the Valley — valuing it at $15.39 a share, or more than 50 per cent above what the shares were deemed to be worth only six months earlier. But less than two months later, a more sombre picture is sinking in. Square’s assessment of what its shares are now worth is closer to $12 each. Source: http://www.ft.com/cms/s/0/6ad992e6-8792-11e5-9f8c-a8d619fa707c.html http://www.ft.com/cms/s/0/6ad992e6-8792-11e5-9f8c-a8d619fa70...

jackgavigan 11y ago

Whether it's dilutive or not isn't as big a deal as what the options' strike price is. If Square has issued options with a strike price based on the Series E share price (which appears to be ~$15.46), then those options are looking like they're going to be under water. It's not unreasonable to assume that the options would be issued at a discount (because they wouldn't have the guaranteed return provisions provided by the ratchet) but there's no way of knowing if that's the case and, if so, what the discount might be.

branch23 11y ago
agreed, but the article also mentions that square may have to issue more shares in order to satisfy guarantees it made to investors in previous rounds. How might this affect the financial position of employees with options granted at the series E share price?
- jackgavigan 11y ago
  The number of shares only matters in so much as (Number of shares) x (Share price) = (Company valuation) Implicitly, if investors take the view that Square is worth a certain amount, then increasing the number of shares will reduce the value of each share. The shares Square will be issuing to its Series E investors are designed to increase the proportion of the company that they own so that, even though the pie is smaller, their piece of the pie remains a certain size. In principle, everyone else's share of the pie is, therefore, smaller and less valuable as a result.
  - jackgavigan 11y ago
    As recently as September, the company [Square] handed out stock options to staff — one of the main perks of jobs in the Valley — valuing it at $15.39 a share, or more than 50 per cent above what the shares were deemed to be worth only six months earlier. But less than two months later, a more sombre picture is sinking in. Square’s assessment of what its shares are now worth is closer to $12 each. Source: http://www.ft.com/cms/s/0/6ad992e6-8792-11e5-9f8c-a8d619fa707c.html http://www.ft.com/cms/s/0/6ad992e6-8792-11e5-9f8c-a8d619fa70...