4 ms·

There's also just the case that a buyer is happy buying say 88% of the company and having 12% (usually non-voting) shares lie with employees/former employees.

by matt-p 2y ago

There's also just the case that a buyer is happy buying say 88% of the company and having 12% (usually non-voting) shares lie with employees/former employees. Stock options are only really, truly worth anything if they IPO.

fragmede 2y ago
Not since... I'm not sure the regulatory change, but if employees are able to sell back to the company or to private investors, resulting in cold hard cash in employee bank accounts, without the company going public, I'd say they are worth something. We can argue about how, without an IPO, the price isn't fairly decided upon, but having cold hard cash in the bank is nonetheless real.
- robertlagrant 2y ago
  I've never heard of being able to sell back stock options. You don't own anything with an option. You just have the right to buy at a price in the future.
  - fragmede 2y ago
    I didn't say stock options. There is a mechanism through which SpaceX employees have been able to cash out some sort of financial object that they received, despite the company not being public.
    - robertlagrant 2y ago
      The comment you were replying to ended with this: > Stock options are only really, truly worth anything if they IPO.
      - fragmede 2y ago
        fair. the important thing here is that IPO is not the only way to liquidity for early employees
        robertlagrant 2y ago
        Well, I'm not sure it is. People are pretty aware of salaries already for example. This was about stock options specifically.
        fragmede 2y ago
        Right so for options, when the employee leaves the company, they can convert them to shares, and then there are ways for them to sell those shares somehow, and it results in cash money somewhere down the road that isn't just the salary.
rsanek 2y ago
IPO is not the only way for employees to access liquidity
- Der_Einzige 2y ago
  It sure fucking seems like it is! Have you tried to buy early stock in startups? You have to have 10K minimum in most cases. I’d have bought huggingface, openAI, anthropic, unsloth, and many others stock right at this moment if I could get in for less than 10K. Prove me wrong internet. I’m ready to buy in these companies this minute.
  - sokoloff 2y ago
    Across the universe of accredited investors, I don’t think that a $10K minimum is a significant barrier. We can argue whether the accredited investor process is good or bad (I think it’s more good than bad), but I don’t blame companies for not wanting a bunch of $872 high roller outsiders on the cap table.
  - matt-p 2y ago
    I don't usually see minimums below 25K, which is fine and sensible. You really need some kind of a proxy to aggregate anything less than that in practice - thinks like crowdcube or similar. Can you imagine having to draw up paperwork just to transact $1200 or something? Doesn't make much sense.
  - coderjames 2y ago
    An outside individual purchasing shares is not the same as employees accessing liquidity. As one example, SpaceX is privately held but routinely does funding rounds with large investors so employees can sell shares and access liquidity[1][2]. A $10,000 minimum purchase amount is trivial for those investors. [1] https://www.reuters.com/markets/us/elon-musks-spacex-raises-over-337-mln-fresh-funding-2021-12-29/ https://www.reuters.com/markets/us/elon-musks-spacex-raises-... [2] https://www.reuters.com/business/aerospace-defense/spacex-fundraising-talks-150-bln-valuation-bloomberg-news-2022-11-15/ https://www.reuters.com/business/aerospace-defense/spacex-fu...
  - 2y ago
wraaath 2y ago
True that stock _options_ are only worth something after an IPO, but vested and exercised stock options that get turned into equity is a different story. Equity can be worth something via acquisition from private equity doing roll-ups, corporate buyers looking to fill strategic product niches, etc Also, for the more heavily vc-funded late stage still pre-ipo plays, secondary market, which can be at a discount to the most recent vc round, or in some rare instances in a hot sector, premium. One other thing - waiting for the IPO might be the worst thing to wait to do. The public markets are much more fickle than private markets. Once a company IPOs, there's usually a trading moratorium on insider shares, usually 180 days, so by then, the equity value may have completely imploded.
- matt-p 2y ago
  My point still stands even if it's equity. PE/corp buyers may not care about buying out the very small minority stock holders, that is the point I 'm making. Lets say you've got Founder A 25% - Voting, Founder B 25% - Voting, Investor A 10% - Voting, Investor B 15% - Voting, Investor C 8% - Voting. Former Employee A 0.5% - Non Voting, Former Employee B 0.4% - Non Voting, Employee C+ 0.2-0.3% each all Non Voting. If say Big Co want's to buy the company why do they care about buying out former Employee B? If they can pickup the two founders and the three investors, thats enough for complete practical control.
  - wraaath 2y ago
    That hasn't been my experience. I've never had the experience of BigCo only acquiring just enough for 50.1% ownership. There's also clauses in the equity plans for participation on change of control (assuming that BigCo taking 50.1% constitutes change of control)
    - matt-p 2y ago
      it's a particular issue with PE, who aren't really doing it for strategic reasons, but really are just there to make money.

by matt-p 2y ago

fragmede 2y ago

Not since... I'm not sure the regulatory change, but if employees are able to sell back to the company or to private investors, resulting in cold hard cash in employee bank accounts, without the company going public, I'd say they are worth something. We can argue about how, without an IPO, the price isn't fairly decided upon, but having cold hard cash in the bank is nonetheless real.

robertlagrant 2y ago
I've never heard of being able to sell back stock options. You don't own anything with an option. You just have the right to buy at a price in the future.
- fragmede 2y ago
  I didn't say stock options. There is a mechanism through which SpaceX employees have been able to cash out some sort of financial object that they received, despite the company not being public.
  - robertlagrant 2y ago
    The comment you were replying to ended with this: > Stock options are only really, truly worth anything if they IPO.
    - fragmede 2y ago
      fair. the important thing here is that IPO is not the only way to liquidity for early employees
      - robertlagrant 2y ago
        Well, I'm not sure it is. People are pretty aware of salaries already for example. This was about stock options specifically.
        fragmede 2y ago
        Right so for options, when the employee leaves the company, they can convert them to shares, and then there are ways for them to sell those shares somehow, and it results in cash money somewhere down the road that isn't just the salary.

rsanek 2y ago

IPO is not the only way for employees to access liquidity

Der_Einzige 2y ago
It sure fucking seems like it is! Have you tried to buy early stock in startups? You have to have 10K minimum in most cases. I’d have bought huggingface, openAI, anthropic, unsloth, and many others stock right at this moment if I could get in for less than 10K. Prove me wrong internet. I’m ready to buy in these companies this minute.
- sokoloff 2y ago
  Across the universe of accredited investors, I don’t think that a $10K minimum is a significant barrier. We can argue whether the accredited investor process is good or bad (I think it’s more good than bad), but I don’t blame companies for not wanting a bunch of $872 high roller outsiders on the cap table.
- matt-p 2y ago
  I don't usually see minimums below 25K, which is fine and sensible. You really need some kind of a proxy to aggregate anything less than that in practice - thinks like crowdcube or similar. Can you imagine having to draw up paperwork just to transact $1200 or something? Doesn't make much sense.
- coderjames 2y ago
  An outside individual purchasing shares is not the same as employees accessing liquidity. As one example, SpaceX is privately held but routinely does funding rounds with large investors so employees can sell shares and access liquidity[1][2]. A $10,000 minimum purchase amount is trivial for those investors. [1] https://www.reuters.com/markets/us/elon-musks-spacex-raises-over-337-mln-fresh-funding-2021-12-29/ https://www.reuters.com/markets/us/elon-musks-spacex-raises-... [2] https://www.reuters.com/business/aerospace-defense/spacex-fundraising-talks-150-bln-valuation-bloomberg-news-2022-11-15/ https://www.reuters.com/business/aerospace-defense/spacex-fu...
- 2y ago

wraaath 2y ago

True that stock _options_ are only worth something after an IPO, but vested and exercised stock options that get turned into equity is a different story. Equity can be worth something via acquisition from private equity doing roll-ups, corporate buyers looking to fill strategic product niches, etc Also, for the more heavily vc-funded late stage still pre-ipo plays, secondary market, which can be at a discount to the most recent vc round, or in some rare instances in a hot sector, premium. One other thing - waiting for the IPO might be the worst thing to wait to do. The public markets are much more fickle than private markets. Once a company IPOs, there's usually a trading moratorium on insider shares, usually 180 days, so by then, the equity value may have completely imploded.

matt-p 2y ago
My point still stands even if it's equity. PE/corp buyers may not care about buying out the very small minority stock holders, that is the point I 'm making. Lets say you've got Founder A 25% - Voting, Founder B 25% - Voting, Investor A 10% - Voting, Investor B 15% - Voting, Investor C 8% - Voting. Former Employee A 0.5% - Non Voting, Former Employee B 0.4% - Non Voting, Employee C+ 0.2-0.3% each all Non Voting. If say Big Co want's to buy the company why do they care about buying out former Employee B? If they can pickup the two founders and the three investors, thats enough for complete practical control.
- wraaath 2y ago
  That hasn't been my experience. I've never had the experience of BigCo only acquiring just enough for 50.1% ownership. There's also clauses in the equity plans for participation on change of control (assuming that BigCo taking 50.1% constitutes change of control)
  - matt-p 2y ago
    it's a particular issue with PE, who aren't really doing it for strategic reasons, but really are just there to make money.