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What do you mean by this "The real people getting screwed by these paper unicorns though are the late stage employees being sold options as compensation"? I'm
by dubroff 11y ago
What do you mean by this "The real people getting screwed by these paper unicorns though are the late stage employees being sold options as compensation"?
I'm currently a student job searching and this seems pretty relevant.
- balls187 11y agoEmployees and Investors of private companies hold different class(es) of stock. Employees (and Founders) have common stock, while Investors get preferred stock. Preferred stock carries with it a "liquidation preference", which basically means holders of that stock get paid out first during a liquidity event, including some multiple of their original investment. What ever is left, is divided among the holders of common stock. If the company is publicly traded, then all owners of stock hold the same class of stock (common).
- aidenn0 11y agoYou get options offered at a strike price that (for tax reasons) usually matches the market value of the company. If the company is way overvalued on paper, that makes the options essentially worthless, as the strike price is higher than what you could trade the shares for.