4 ms·
If you IPO at substantially lower prices than you thought you were valued at, or you IPO at a fine price and then shortly post-IPO, the stock value drops consid
by aetherson 10y ago
If you IPO at substantially lower prices than you thought you were valued at, or you IPO at a fine price and then shortly post-IPO, the stock value drops considerably, then it wasn't a big IPO.
Not to dismiss issues of employees being at the "back of the line" for equity payout. That is certainly a thing. But this article lists a bunch of examples of employees getting somewhat disappointing payouts when the ultimate valuation of the company was somewhat disappointing, while presenting it as employees getting somewhat disappointing payouts from "big IPOs."
A lot of people seem to have a problem with understanding that you can't just look at absolute numbers for a company's value. If your company raised a lot of money with the expectation that they would be a $4B company, and then they were a $750M company, well, $750M is a lot of money, but sorry, you had a disappointing IPO and preference is going to eat up a lot of the company's value -- maybe all of it.
- danielweber 10y agoEmployees usually have no visibility into preference, even when explicitly asking about it.
- aetherson 10y agoSure. And I'm not saying that's not a problem, but here's the basic thing you need to know about preference: If your real valuation turns out to be lower than what you raised money at, preference will eat a bunch or all of your valuation. And this shouldn't really surprise anyone. It's like some people at HN heard the old joke "How do you make a million in publishing? Start with ten million," and thought: a. Yes, that seems valid. b. Where's my share of the resulting million?
- danielweber 10y ago"You only lose to preference in case of a lowered valuation" is true only for 1x preferences. For 2x preferences, employees can lose out even if the valuation goes up, just by not as much as needed.