Comment by itake
21 hours ago
I'm curious how the employees faired. Seems like they may bet getting nothing out of the deal if the investors get their money back.
21 hours ago
I'm curious how the employees faired. Seems like they may bet getting nothing out of the deal if the investors get their money back.
These days, most employees getting nothing out of the deal is par for the course for acquisitions, unfortunately. The acquisition price is almost never exchanged directly for shares in the company as implied, often a chunk of it is kept for key personnel retention, etc. Typically just enough goes towards the share purchase to make investors happy, and the rest is structured as incentives for founders and key execs with milestone payouts. That‘s the set of people with leverage towards making the acquisition happen, so that‘s who gets paid.
If you‘re just a regular employee with some options, and the acquirer doesn‘t want to keep you on, you should expect nothing.
> Typically just enough goes towards the share purchase to make investors happy, and the rest is structured as incentives for founders and key execs with milestone payouts.
So they're getting the employees' shares without compensating the employees?
And there's incentives paid to the people who approved the deal, separate from their shares?
(I've heard of liquidation preferences, but never by the person making a job offer with stock options. Bribery also never came up.)
Yes, and yes. The sibling comment here about liquidation preferences is correct, and these separate incentives are usually structured as retention incentives — eg, compensation for future work with the acquiring company.
Shareholders are of course free to sue the board for acting outside of the interests of the shareholders overall, but this happens very rarely because typically the company would otherwise be shutting down and it’s very hard to make the argument that the deal undervalues common shareholders’ shares.
Because “shares” are not all the same. Preferred vs common, so unless you negotiated some kind of preferred share terms, assume your shares are worthless. For a non publicly listed company. For a publicly listed company, the details are all publicly available, so the different types of shares will have their different prices be easily available to see.
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Brex has been around for a long time, so employees will have been issued stock options with vastly different exercise prices.
Early employees' options will have value, but more recent options are likely underwater.
I strongly suspect they shifted to RSUs at those valuations.
It seems unlikely that regular employees would be issued RSUs. Tax is due at vest, and you can't liquidate to fund the tax bill.
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options can only last 7 years, but brex was founded in 2017.
Who says options can only last 7 years?
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When the options expire do they give new equivalent ones to the employees that hung on? Otherwise what’s the point?
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While I don't think it's the case here, but a lot of time there is more liquidity preference than the deal value so employees can only get what investor want them to pay.
We know how the employees did. Same as ever. They got whatever slop was left in the trough after the big pigs ate their share.
Bitter about VCs? Me? Never.