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Can someone explain why Pre IPO stock would be worth so much? Either something is wildly inefficient, or the employees are getting duped. If X shares are expe
by martincmartin 16y ago
Can someone explain why Pre IPO stock would be worth so much? Either something is wildly inefficient, or the employees are getting duped. If X shares are expected to be worth $1m after IPO, Facebook could offer potential employees X/2 shares, which is still a $500k signing bonus, and use the other shares for something else.
- ahi 16y agoIt's a risk/reward calculation. There is a small possibility of pre-IPO stock being worth fuck you money. Google can't even off the possibility of fuck you money, but they can offer decent money (although anecdotal evidence says they underpay) with low risk. Unfortunately for Google, many of their employees have risk/reward profiles closer to Facebook than Google. Random numbers: Facebook: Shares with a 1% chance of being worth $10m Google: Guaranteed $100,000. Same expected value, different tolerances for risk.