4 ms·

What if my company doesn't tell its employees how many shares have been issued, so that it's impossible for us to know what percentage of the company we own?

by phy6 8y ago

unholiness 8y ago
Then that's absurd, and you should push back. You wouldn't accept your salary in a currency with no known exchange rate, why would you accept options without knowing the size of the pie?
- PeterFBell 8y ago
  As mentioned by someone else, estimating how much of the company you have depends on seeing the complete cap table (redacted for names is fine) along with a copy of all of the major financing documents to validate liquidation preferences, participation mechanisms, sweeteners for i-bankers and various other instruments. Good luck getting that information as a dev. Given that, I tend to join the group that value options in an early stage private company as "worthless". If the cash comp doesn't work for me, it's unlikely the options will move the needle as I'll probably need to be there 5-9 years to actually see a positive event and I'll need to do that 5-10 times to have a solid chance of a couple of meaningful wins. Of course, some of the failures you can drop out after a year or two, but it's still many decades to have a reasonable possibility of a return from options. It's hard enough for VCs who do this for a living and can make 10-50 simultaneous bets to come out well ahead - and the good ones have access to insane deal flow and all the docs during due diligence. Good luck being confident that you will beat that serially with limited deal flow and limited due diligence access. To be clear, a certain proportion of people here DID beat that and are doing great with stock options, but the odds are not in your favor . . .
  - phy6 8y ago
    Thanks, this was a good amount to chew on. I feel like a first grader peeking into the 2nd grader's math class.
smallgovt 8y ago
If your employer refuses to disclose # of issued shares, you have absolutely no way of valuing your shares. I can't think of one good reason why they'd be unwilling to give you this information, and as a result, I'd actually advise that you value your shares to be worthless.
- phamilton 8y ago
  I had that once and I told the hiring manager that without that number I have to treat them as zero value. He said that was reasonable, and we negotiated on salary instead.
- phy6 8y ago
  I agree, without knowing, we can only assume they will be worthless. I am in the US, Do you think discussion of this among employees is protected under the National Labor Relations Act, say in our company's private Discord channel?
  - smallgovt 8y ago
    I'm not sure. If you really want an answer, I'd post the question to Avvo and see what responses you get. I've found that you typically get written responses from real lawyers within 24 hours, and for generic questions like this, they don't ask for a paid consultation. IANAL and not related to Avvo in any way.
- squirrel 8y ago
  In the UK the total number of shares, and maybe the cap table (I don’t remember) is available from Companies House for a nominal fee, as part of the company’s annual accounts. No idea what the situation is elsewhere, sorry.
icedchai 8y ago
That doesn't really tell you everything anyway. You need to know the what sort of "deal" the existing investors have: liquidation preferences, dividends/interest, etc.
jonahss 8y ago
If it's registered in Delaware, I remember an article once describing how you can apply to get the number of outstanding shares.
smallgovt 8y ago
I just did some more research, and actually, for many US states, you can request a copy of any corporation's annual report, which includes the # of authorized shares. The information you actually need is the # of issued shares, which is some fraction of # of authorized shares. You will have to make an assumption as to what that fraction is. From personal experience running several startups, I would recommend using 70%. So, you need to: 1) Find out what state your employer's corporation is registered in 2) Request annual report from state's entity search website (e.g. https://icis.corp.delaware.gov/Ecorp/EntitySearch/NameSearch.aspx https://icis.corp.delaware.gov/Ecorp/EntitySearch/NameSearch...) 3) Calculate issued shares based on some assumed fraction of authorized shares.
bethly 8y ago
Then you're stuck: there isn't any way to value shares in something without knowing the denominator. Your company should be willing to provide the "fully-diluted basis" for your shares if you ask.

What if my company doesn't tell its employees how many shares have been issued, so that it's impossible for us to know what percentage of the company we own?

by phy6 8y ago

What if my company doesn't tell its employees how many shares have been issued, so that it's impossible for us to know what percentage of the company we own?

unholiness 8y ago

Then that's absurd, and you should push back. You wouldn't accept your salary in a currency with no known exchange rate, why would you accept options without knowing the size of the pie?

PeterFBell 8y ago
As mentioned by someone else, estimating how much of the company you have depends on seeing the complete cap table (redacted for names is fine) along with a copy of all of the major financing documents to validate liquidation preferences, participation mechanisms, sweeteners for i-bankers and various other instruments. Good luck getting that information as a dev. Given that, I tend to join the group that value options in an early stage private company as "worthless". If the cash comp doesn't work for me, it's unlikely the options will move the needle as I'll probably need to be there 5-9 years to actually see a positive event and I'll need to do that 5-10 times to have a solid chance of a couple of meaningful wins. Of course, some of the failures you can drop out after a year or two, but it's still many decades to have a reasonable possibility of a return from options. It's hard enough for VCs who do this for a living and can make 10-50 simultaneous bets to come out well ahead - and the good ones have access to insane deal flow and all the docs during due diligence. Good luck being confident that you will beat that serially with limited deal flow and limited due diligence access. To be clear, a certain proportion of people here DID beat that and are doing great with stock options, but the odds are not in your favor . . .
- phy6 8y ago
  Thanks, this was a good amount to chew on. I feel like a first grader peeking into the 2nd grader's math class.

smallgovt 8y ago

If your employer refuses to disclose # of issued shares, you have absolutely no way of valuing your shares. I can't think of one good reason why they'd be unwilling to give you this information, and as a result, I'd actually advise that you value your shares to be worthless.

phamilton 8y ago
I had that once and I told the hiring manager that without that number I have to treat them as zero value. He said that was reasonable, and we negotiated on salary instead.
phy6 8y ago
I agree, without knowing, we can only assume they will be worthless. I am in the US, Do you think discussion of this among employees is protected under the National Labor Relations Act, say in our company's private Discord channel?
- smallgovt 8y ago
  I'm not sure. If you really want an answer, I'd post the question to Avvo and see what responses you get. I've found that you typically get written responses from real lawyers within 24 hours, and for generic questions like this, they don't ask for a paid consultation. IANAL and not related to Avvo in any way.
squirrel 8y ago
In the UK the total number of shares, and maybe the cap table (I don’t remember) is available from Companies House for a nominal fee, as part of the company’s annual accounts. No idea what the situation is elsewhere, sorry.

icedchai 8y ago

That doesn't really tell you everything anyway. You need to know the what sort of "deal" the existing investors have: liquidation preferences, dividends/interest, etc.

jonahss 8y ago

If it's registered in Delaware, I remember an article once describing how you can apply to get the number of outstanding shares.

smallgovt 8y ago

I just did some more research, and actually, for many US states, you can request a copy of any corporation's annual report, which includes the # of authorized shares. The information you actually need is the # of issued shares, which is some fraction of # of authorized shares. You will have to make an assumption as to what that fraction is. From personal experience running several startups, I would recommend using 70%. So, you need to: 1) Find out what state your employer's corporation is registered in 2) Request annual report from state's entity search website (e.g. https://icis.corp.delaware.gov/Ecorp/EntitySearch/NameSearch.aspx https://icis.corp.delaware.gov/Ecorp/EntitySearch/NameSearch...) 3) Calculate issued shares based on some assumed fraction of authorized shares.

bethly 8y ago

Then you're stuck: there isn't any way to value shares in something without knowing the denominator. Your company should be willing to provide the "fully-diluted basis" for your shares if you ask.