Options backdating which companies are at risk

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Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of might claim that those are “worth” M.However, if the share price stays at for the lifetime of the option, the options will end up being worth

Let’s look at an actual example of dilution at a real company.

The preferred stock VCs get usually has a 1x liquidation preference.

Let’s say the investors had a 2x liquidation preference in the above scenario.

Let’s say a company raised 0M by selling 30% of the company, giving the company an implied valuation of

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of $10 might claim that those are “worth” $10M.However, if the share price stays at $10 for the lifetime of the option, the options will end up being worth $0 because an option with a $10 strike price is an option to buy the stock at $10, which is not the same as a grant of actual shares worth $10 a piece.They would get 2x their investment back before the common stockholders split the rest of the company.Since 2 * $300M is greater than $500M, the investors would get everything and the remaining equity holders would get $0.

||

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of $10 might claim that those are “worth” $10M.

However, if the share price stays at $10 for the lifetime of the option, the options will end up being worth $0 because an option with a $10 strike price is an option to buy the stock at $10, which is not the same as a grant of actual shares worth $10 a piece.

They would get 2x their investment back before the common stockholders split the rest of the company.

Since 2 * $300M is greater than $500M, the investors would get everything and the remaining equity holders would get $0.

Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.

B.

The most common misrepresentation I see is that the company will claim that because they’re giving an option for, say, 0.1% of the company, your option is worth

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of $10 might claim that those are “worth” $10M.However, if the share price stays at $10 for the lifetime of the option, the options will end up being worth $0 because an option with a $10 strike price is an option to buy the stock at $10, which is not the same as a grant of actual shares worth $10 a piece.They would get 2x their investment back before the common stockholders split the rest of the company.Since 2 * $300M is greater than $500M, the investors would get everything and the remaining equity holders would get $0.

||

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of $10 might claim that those are “worth” $10M.

However, if the share price stays at $10 for the lifetime of the option, the options will end up being worth $0 because an option with a $10 strike price is an option to buy the stock at $10, which is not the same as a grant of actual shares worth $10 a piece.

They would get 2x their investment back before the common stockholders split the rest of the company.

Since 2 * $300M is greater than $500M, the investors would get everything and the remaining equity holders would get $0.

Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.

B * 0.001 =

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of $10 might claim that those are “worth” $10M.However, if the share price stays at $10 for the lifetime of the option, the options will end up being worth $0 because an option with a $10 strike price is an option to buy the stock at $10, which is not the same as a grant of actual shares worth $10 a piece.They would get 2x their investment back before the common stockholders split the rest of the company.Since 2 * $300M is greater than $500M, the investors would get everything and the remaining equity holders would get $0.

||

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of $10 might claim that those are “worth” $10M.

However, if the share price stays at $10 for the lifetime of the option, the options will end up being worth $0 because an option with a $10 strike price is an option to buy the stock at $10, which is not the same as a grant of actual shares worth $10 a piece.

They would get 2x their investment back before the common stockholders split the rest of the company.

Since 2 * $300M is greater than $500M, the investors would get everything and the remaining equity holders would get $0.

Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.

M.

because an option with a strike price is an option to buy the stock at , which is not the same as a grant of actual shares worth a piece.They would get 2x their investment back before the common stockholders split the rest of the company.Since 2 * 0M is greater than 0M, the investors would get everything and the remaining equity holders would get

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of might claim that those are “worth” M.

However, if the share price stays at for the lifetime of the option, the options will end up being worth

Let’s look at an actual example of dilution at a real company.The preferred stock VCs get usually has a 1x liquidation preference.Let’s say the investors had a 2x liquidation preference in the above scenario.Let’s say a company raised 0M by selling 30% of the company, giving the company an implied valuation of

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of $10 might claim that those are “worth” $10M.However, if the share price stays at $10 for the lifetime of the option, the options will end up being worth $0 because an option with a $10 strike price is an option to buy the stock at $10, which is not the same as a grant of actual shares worth $10 a piece.They would get 2x their investment back before the common stockholders split the rest of the company.Since 2 * $300M is greater than $500M, the investors would get everything and the remaining equity holders would get $0.

||

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of $10 might claim that those are “worth” $10M.

However, if the share price stays at $10 for the lifetime of the option, the options will end up being worth $0 because an option with a $10 strike price is an option to buy the stock at $10, which is not the same as a grant of actual shares worth $10 a piece.

They would get 2x their investment back before the common stockholders split the rest of the company.

Since 2 * $300M is greater than $500M, the investors would get everything and the remaining equity holders would get $0.

Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.

B.The most common misrepresentation I see is that the company will claim that because they’re giving an option for, say, 0.1% of the company, your option is worth

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of $10 might claim that those are “worth” $10M.However, if the share price stays at $10 for the lifetime of the option, the options will end up being worth $0 because an option with a $10 strike price is an option to buy the stock at $10, which is not the same as a grant of actual shares worth $10 a piece.They would get 2x their investment back before the common stockholders split the rest of the company.Since 2 * $300M is greater than $500M, the investors would get everything and the remaining equity holders would get $0.

||

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of $10 might claim that those are “worth” $10M.

However, if the share price stays at $10 for the lifetime of the option, the options will end up being worth $0 because an option with a $10 strike price is an option to buy the stock at $10, which is not the same as a grant of actual shares worth $10 a piece.

They would get 2x their investment back before the common stockholders split the rest of the company.

Since 2 * $300M is greater than $500M, the investors would get everything and the remaining equity holders would get $0.

Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.

B * 0.001 =

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of $10 might claim that those are “worth” $10M.However, if the share price stays at $10 for the lifetime of the option, the options will end up being worth $0 because an option with a $10 strike price is an option to buy the stock at $10, which is not the same as a grant of actual shares worth $10 a piece.They would get 2x their investment back before the common stockholders split the rest of the company.Since 2 * $300M is greater than $500M, the investors would get everything and the remaining equity holders would get $0.

||

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of $10 might claim that those are “worth” $10M.

However, if the share price stays at $10 for the lifetime of the option, the options will end up being worth $0 because an option with a $10 strike price is an option to buy the stock at $10, which is not the same as a grant of actual shares worth $10 a piece.

They would get 2x their investment back before the common stockholders split the rest of the company.

Since 2 * $300M is greater than $500M, the investors would get everything and the remaining equity holders would get $0.

Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.

M.

because an option with a strike price is an option to buy the stock at , which is not the same as a grant of actual shares worth a piece.

They would get 2x their investment back before the common stockholders split the rest of the company.

Since 2 * 0M is greater than 0M, the investors would get everything and the remaining equity holders would get [[

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of $10 might claim that those are “worth” $10M.However, if the share price stays at $10 for the lifetime of the option, the options will end up being worth $0 because an option with a $10 strike price is an option to buy the stock at $10, which is not the same as a grant of actual shares worth $10 a piece.They would get 2x their investment back before the common stockholders split the rest of the company.Since 2 * $300M is greater than $500M, the investors would get everything and the remaining equity holders would get $0.

||

Some common ways that employee options are misrepresented are: A company that gives you 1M options with a strike price of $10 might claim that those are “worth” $10M.

However, if the share price stays at $10 for the lifetime of the option, the options will end up being worth $0 because an option with a $10 strike price is an option to buy the stock at $10, which is not the same as a grant of actual shares worth $10 a piece.

They would get 2x their investment back before the common stockholders split the rest of the company.

Since 2 * $300M is greater than $500M, the investors would get everything and the remaining equity holders would get $0.

Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.

]].

Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.

.

options backdating which companies are at risk-61

options backdating which companies are at risk-15

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Let’s look at an actual example of dilution at a real company.

The preferred stock VCs get usually has a 1x liquidation preference.

Let’s say the investors had a 2x liquidation preference in the above scenario.

Let’s say a company raised $300M by selling 30% of the company, giving the company an implied valuation of $1B.

The most common misrepresentation I see is that the company will claim that because they’re giving an option for, say, 0.1% of the company, your option is worth $1B * 0.001 = $1M.

||

Let’s look at an actual example of dilution at a real company.The preferred stock VCs get usually has a 1x liquidation preference.Let’s say the investors had a 2x liquidation preference in the above scenario.Let’s say a company raised $300M by selling 30% of the company, giving the company an implied valuation of $1B.The most common misrepresentation I see is that the company will claim that because they’re giving an option for, say, 0.1% of the company, your option is worth $1B * 0.001 = $1M.

]]

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