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Basically it works like this: If your options become very valuable, the people on the other side of the table are no longer the friendly technical founders that

by avn2109 12y ago

Basically it works like this: If your options become very valuable, the people on the other side of the table are no longer the friendly technical founders that you know and love. Instead, they're replaced by calm, professional capitalists and attorneys, whose sole raison d'etre is to separate you from "your" claim to their assets by many convoluted and entirely legal tricks, all of which feel profoundly unjust to the common man. They are specialists; they do this all day, every day, and since you are just an unsophisticated code monkey, it's vaguely like playing one-on-one basketball with Lebron. So unless you have something their bosses really want (perhaps domain knowledge of the business) you almost invariably end up with pennies and fake smiles.

kabdib 12y ago
That's exactly right. "Sorry, it's the red options that have worth, all of those blue options were devalued in [some arcane legal event] and are worthless now." I've thought about talking to a lawyer, but I'm guessing that what they did was totally legal, on the order of selling the company's assets to a company of the same name for a dollar in hand, or something like that, with some kind of structure to keep the major investors happy.
- cheriot 12y ago
  There are laws requiring major shareholders to protect the interests of minority shareholders for this exact reason. It may be worth talking to that lawyer.
  - kabdib 12y ago
    Interesting. The email I got from their stock administrator read: > As a result of a transaction in 2001 that created CompanyName Acquisition Corporation, now named CompanyName, Inc., all equity interests in the predecessor companies were extinguished. I guess I'll talk to a lawyer. They were sold for $3.5B, so that might be an interesting up-side.
    - cheriot 12y ago
      Wow, I hope you write about what you find out. The situations like that I've heard of, and admittedly that's mostly from following the press, is that the old shares are traded for shares in the new entity. If minority owners aren't protected, it's a crack in the foundation of silicon valley.
- infinii 12y ago
  But is this 'legal' even if the employee didn't sign anything to change the previously agreed upon arrangement (options)??
  - pc86 12y ago
    As with every legal question the answer is "sometimes." But typically, yes it is legal. See the comment below that basically allows the "extinguishing" of options under certain restructuring.
darkarmani 12y ago
The most recent way I found out was the offer letter that spoke of my grant said "on board approval." A year later, they had never gotten board approval. I was long gone, but another year later and my old colleagues had finally gotten their grant. Preventing board approval for a long time is a nice way to extend the 1-year cliff. Even better, my email to the controller and then to the CFO was completely ignored. That is what really set off my spidey-sense. IMHO, if the officers aren't willing to acknowledge my questions in email, they have legal reasons for not having anything recorded. Oh, and they were recently acquired by BAE for a lot of money. The officers made a killing, but my friends made around 4-figures. I have no idea what they did to get board approval but it feels like they rejiggered things to dilute everyone else.

by avn2109 12y ago

kabdib 12y ago

That's exactly right. "Sorry, it's the red options that have worth, all of those blue options were devalued in [some arcane legal event] and are worthless now." I've thought about talking to a lawyer, but I'm guessing that what they did was totally legal, on the order of selling the company's assets to a company of the same name for a dollar in hand, or something like that, with some kind of structure to keep the major investors happy.

cheriot 12y ago
There are laws requiring major shareholders to protect the interests of minority shareholders for this exact reason. It may be worth talking to that lawyer.
- kabdib 12y ago
  Interesting. The email I got from their stock administrator read: > As a result of a transaction in 2001 that created CompanyName Acquisition Corporation, now named CompanyName, Inc., all equity interests in the predecessor companies were extinguished. I guess I'll talk to a lawyer. They were sold for $3.5B, so that might be an interesting up-side.
  - cheriot 12y ago
    Wow, I hope you write about what you find out. The situations like that I've heard of, and admittedly that's mostly from following the press, is that the old shares are traded for shares in the new entity. If minority owners aren't protected, it's a crack in the foundation of silicon valley.
infinii 12y ago
But is this 'legal' even if the employee didn't sign anything to change the previously agreed upon arrangement (options)??
- pc86 12y ago
  As with every legal question the answer is "sometimes." But typically, yes it is legal. See the comment below that basically allows the "extinguishing" of options under certain restructuring.

darkarmani 12y ago

The most recent way I found out was the offer letter that spoke of my grant said "on board approval." A year later, they had never gotten board approval. I was long gone, but another year later and my old colleagues had finally gotten their grant. Preventing board approval for a long time is a nice way to extend the 1-year cliff. Even better, my email to the controller and then to the CFO was completely ignored. That is what really set off my spidey-sense. IMHO, if the officers aren't willing to acknowledge my questions in email, they have legal reasons for not having anything recorded. Oh, and they were recently acquired by BAE for a lot of money. The officers made a killing, but my friends made around 4-figures. I have no idea what they did to get board approval but it feels like they rejiggered things to dilute everyone else.