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You're either undervaluing common stock or vastly overvaluing preferred stock. Probably the latter? If you join with options for preferred stock (assuming anyo
by mrkurt 4y ago
You're either undervaluing common stock or vastly overvaluing preferred stock. Probably the latter?
If you join with options for preferred stock (assuming anyone is going to do such a thing), you're probably getting a 1x liquidation preference. But preferred stock has a higher fair market value than common stock. So the strike price will be higher. Probably close to the liquidation preference.
Which means, you're asking for something that will net you $0 if the liquidation preference kicks in. And you'll earn less in the upside case because your exercise price would be higher.
- pclmulqdq 4y agoOh no, that calculation was for equity, not for an option. An option would have totally different pricing models, and it would likely be closer in value due to the strike prices. However, options are probably overvalued a LOT by startups. They think they are like equities, when they are a lot more like... options. Also, 10x is a little off, but I also work on infrastructure and infrastructure companies tend to get acquired rather than IPOing. Edit - as for the actual terms of the stocks in question, it was never what you were thinking (1x preference), but I probably can't say what it was.