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What does "their stake is being diluted in the process" mean specifically in this case? What exactly is getting diluted (does the issuance of extra shares to m
by chambo622 11y ago
What does "their stake is being diluted in the process" mean specifically in this case? What exactly is getting diluted (does the issuance of extra shares to make up for the lower IPO price constitute dilution, or is it something else)?
- not_that_noob 11y agoYes exactly. You thought you owned 1%, and all of a sudden you realize you owned 0.9%. And now that's 0.9% at a lower valuation, so you got screwed twice.
- chambo622 11y agoHow does this actually work - are they actually creating more shares to give to the investors that bought in with this stipulation? Or are these shares coming from some pre-existing pool? I'm admittedly quite unfamiliar with this stuff, so I'm curious how the 'dilution' occurs.
- akg_67 11y agoThis blog post provides decent summary of preferred stock impact on Employee stock. STARTUP NEGOTIATIONS: HOW PREFERRED STOCK MAKES EMPLOYEE STOCK LESS VALUABLE http://stockoptioncounsel.com/blog/negotiating-equity-what-is-the-total-preference/2014/2/13 http://stockoptioncounsel.com/blog/negotiating-equity-what-i...