Comment by zamfi
14 hours ago
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.
If that's true, when a startup is making you an offer for ISOs of common shares, and explaining it... how likely are they to know that, in event of a successful exit for the startup, your shares would be diluted and preferenced to 0 value?
(The two most recent offer equity components I accepted were "2%" and "a million shares". On the latter, an upper exec did a kind of deal-closer meeting for their offer, showing me a spreadsheet, estimating how much the options would be worth if there were an exit in X years at $Y valuation.)
[dead]