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The decline in employee option exercise... is that the canary in the mine? If the team itself is saying less and less that their company's equity is worth takin
by corry 3y ago
The decline in employee option exercise... is that the canary in the mine? If the team itself is saying less and less that their company's equity is worth taking a risk on -- and they are in a good position to be optimistic, rightly or wrong -- then that's a pretty bearish signal.
Of course there are other pressures on peoples' personal finances that makes money dearer... but still.
Or perhaps with layoffs there is just a lot of people who could be exercising vested options, but won't because (1) they no longer work there and won't be able to contribute or have an insider advantage, and/or (2) they now don't have a job so won't risk the capital in buying out their options.
- adoxyz 3y agoIt doesn't necessarily signal that the company's equity is in a bad position. I'd venture to think a lot of people would rather keep cash on hand in these times than locked up in a private company.
- persedes 3y agoplus for a lot of companies an IPO might be not in the near future due to the stock market being what it is (even though who knows anymore...). So why buy options if you don't know when you'll get to sell it.
- cj 3y agoAre 409a valuations coming down for companies who raised at crazy valuations? Are startups repricing their employee stock option strike prices (highly unlikely?) I think the most obvious explanation is a lot of people were hired during a time of inflated valuations and those employees received stock option grants with incredibly high strike prices. Now valuations have tanked over 50%. If this happened in the public markets, you would simply let the options expire rather than acquire the stock at a 100% premium (for example). For similar reasons, it’s probably not advisable to exercise options granted in the last couple of years in most cases, but that’s because valuations are likely down below the strike price for a lot of people.
- stanleydrew 3y agoIn my experience 409a valuations for common stock are effectively set based on a discount to preferred and some handwavy math related to "comparable" public market valuations. So I would expect them to come down, but they will lag 1-ish years behind private preferred round prices. I do think it's somewhat likely that a company would offer to rewrite options at a new lower strike price if employees ask. Of course you'd start all the capital gains clocks again, by probably worth it if the price difference is substantial.
- deleted 3y ago[deleted]
- corry 3y agoGood point, if your options are underwater you probably aren't exercising... although would be sad to watch them expire.