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Are 409a valuations coming down for companies who raised at crazy valuations? Are startups repricing their employee stock option strike prices (highly unlikely?
by cj 4y ago
Are 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 4y 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 4y ago[deleted]
- corry 4y agoGood point, if your options are underwater you probably aren't exercising... although would be sad to watch them expire.