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In fact, if you are like most companies, your managers probably implied to your employees that your stock price would only rise as long as you were private. The
by minimax 13y ago
In fact, if you are like most companies, your managers probably implied to your employees that your stock price would only rise as long as you were private. They might have said something ridiculous like: "Based on the current price of the preferred stock, your offer is already worth $5 million." As if the price could never go down. As if the common stock were actually the same as preferred stock. Silly them.
Is this something that actually happens or is he being hyperbolic? I thought there might be some legal issues around making claims like that.
- acchow 13y agoYes, he is presenting common practice. Many software engineers have read a few finance books and will understand that preference provides a large premium in preferred stock.
- georgemcbay 13y agoI've never personally heard someone make an absolute number statement like "$5 million", but back during the first dot-com boom and bust I certainly saw managers at startups imply untold millions, even to people who held relatively small amounts of common stock. Suffice it to say, those millions were generally fictional, even among companies lucky enough to have big exits before the bubble popped (generally, due to massive dilution of the common stock pool).
- pmarca 13y agoThat happens exactly as Ben described it, including at some very well known startups. It's a ticking time bomb not just in terms of employee morale but also 409A (tax law).