8 ms·

I have to wonder if the employee stock options were worth anything? Most telling is that Walmart decided to throw ~$300M at the founders "and others" to retain

I have to wonder if the employee stock options were worth anything? Most telling is that Walmart decided to throw ~$300M at the founders "and others" to retain them. Does that mean, in this case, that the founding team is the only one who walks away with a payday? And to be clear, this isn't a cynical musing. I'm genuinely curious to see how this worked out for them.

tommynicholas 10y ago
There are always retention bonuses for the founders. What scenario would the options not be worth anything? It's a cash acquisition that is 2x larger than the post of their last round of funding which was fairly recent.
- asmithmd1 10y ago
  The common stock might be worthless if the last money in had a 2x or greater liquidation preference. https://en.wikipedia.org/wiki/Liquidation_preference https://en.wikipedia.org/wiki/Liquidation_preference
  - tommynicholas 10y ago
    It would have to be much more than 2x - 2x would still have no impact because the acquisition was 2x the price of the last round.
    - asmithmd1 10y ago
      You are right. I took a quick look at the cap table on CrunchBase and there is lots of smart money in it. It is definitely a win for the investors but how much of a win for common share holders is up to how hard the CEO fights for them.
      - tommynicholas 10y ago
        So true!
      - morgante 10y ago
        I think everyone will be pretty happy. This isn't Marc's first company (he sold Quidsi to Amazon for $500M) and everyone I know was happy with that deal.
  - Klinky 10y ago
    These kinds of exceptions/clauses/preferences are exactly why people need to think twice before sacrificing their life over stock options. The process is not transparent enough, and even doing some due diligence to try to ensure you're not getting shafted often results in you still getting the shaft. Unless you're dropping major coin as an investor who can dictate terms, all stock options should come with a huge bucket of complimentary salt. It is pretty gross when founders/management try to incentivize burnout with false promises, while banking a nice payday at the end of the rainbow for themselves.
- JonFish85 10y ago
  Some scenarios (in no real particular order): - A Zynga-like order: give back unvested stock or you're fired - There were "hidden" bank loans / lines of credit that need to be paid back first. These may not be known to employees, but generally they are the first in line to be paid back. - If the cash acquisition is assuming they hit some earn-out targets, there's a very, very good chance that they won't get 100% of the money, and in fact could get a lot less. - If the investors had some sort of very tough terms where they get a 1-2x return before participating in the common stock, that could make this worth very little to employees.
  - tommynicholas 10y ago
    #1 is the only one I can imagine (that was such a horrible situation at Zynga, I had family get hit), and given the founder, extremely unlikely. I understand why everyone wants a reason to be skeptical of this acquisition, but all signs point to a home run for everyone involved.
    - shostack 10y ago
      Is there anything employees can do to protect against such a horrible Zynga situation legally?
      - ihaveajob 10y ago
        Look for prior dickish behavior by the founding team, and run like the plague if you find any.
tedmiston 10y ago
It's important to consider that sometimes these acquiring company stock options come with additional vesting attached to them. It can be time based + milestone based.

tommynicholas 10y ago

There are always retention bonuses for the founders. What scenario would the options not be worth anything? It's a cash acquisition that is 2x larger than the post of their last round of funding which was fairly recent.

asmithmd1 10y ago
The common stock might be worthless if the last money in had a 2x or greater liquidation preference. https://en.wikipedia.org/wiki/Liquidation_preference https://en.wikipedia.org/wiki/Liquidation_preference
- tommynicholas 10y ago
  It would have to be much more than 2x - 2x would still have no impact because the acquisition was 2x the price of the last round.
  - asmithmd1 10y ago
    You are right. I took a quick look at the cap table on CrunchBase and there is lots of smart money in it. It is definitely a win for the investors but how much of a win for common share holders is up to how hard the CEO fights for them.
    - tommynicholas 10y ago
      So true!
    - morgante 10y ago
      I think everyone will be pretty happy. This isn't Marc's first company (he sold Quidsi to Amazon for $500M) and everyone I know was happy with that deal.
- Klinky 10y ago
  These kinds of exceptions/clauses/preferences are exactly why people need to think twice before sacrificing their life over stock options. The process is not transparent enough, and even doing some due diligence to try to ensure you're not getting shafted often results in you still getting the shaft. Unless you're dropping major coin as an investor who can dictate terms, all stock options should come with a huge bucket of complimentary salt. It is pretty gross when founders/management try to incentivize burnout with false promises, while banking a nice payday at the end of the rainbow for themselves.
JonFish85 10y ago
Some scenarios (in no real particular order): - A Zynga-like order: give back unvested stock or you're fired - There were "hidden" bank loans / lines of credit that need to be paid back first. These may not be known to employees, but generally they are the first in line to be paid back. - If the cash acquisition is assuming they hit some earn-out targets, there's a very, very good chance that they won't get 100% of the money, and in fact could get a lot less. - If the investors had some sort of very tough terms where they get a 1-2x return before participating in the common stock, that could make this worth very little to employees.
- tommynicholas 10y ago
  #1 is the only one I can imagine (that was such a horrible situation at Zynga, I had family get hit), and given the founder, extremely unlikely. I understand why everyone wants a reason to be skeptical of this acquisition, but all signs point to a home run for everyone involved.
  - shostack 10y ago
    Is there anything employees can do to protect against such a horrible Zynga situation legally?
    - ihaveajob 10y ago
      Look for prior dickish behavior by the founding team, and run like the plague if you find any.

tedmiston 10y ago

It's important to consider that sometimes these acquiring company stock options come with additional vesting attached to them. It can be time based + milestone based.