Per multiple HN disucssions I have understood to value equity in startups a 0$.
I am working for a startup that is on track to IPO within the next year or so. I have some share options as part of my contract that allows me to buy shares at a certain strike price.
I am in the dark on how I should value this.
Are these share options actually transferred 1:1 into a share after an IPO? Is there a possibility of a reverse split?
I am quite lost on how to value this as I am considering moving to a new company and want to understand if I am potentially making a financial mistake by leaving.
Can anyone point me to some good ressources on this?
Thanks
Ask HN: How to value share options for pre IPO Employeer
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Re: Ask HN: How to value share options for pre IPO Employeer
#2Best to keep them at $0 value. Even when there is an emanant IPO there are so many variables that can keep the options at $0 that it's best to look at them as having no value. To top that off, all cases are different so your best bet is to consult an experienced attorney. You might want to get together with others in the same situation so you can share the costs. But don't make a general announcement. Your bosses might not like it.
Remember, companies are looking at their interest 1st, yours second, if that. So chances are that whatever happens, the company will come out ahead.
Re: Ask HN: How to value share options for pre IPO Employeer
#3Post-IPO they would ordinarily become options to buy the same number of shares. If the company was acquired before then, all bets are off. Extremely likely that investor preferences will consume some of the value in preferred shares, maybe well cash off the top too.
From a tax perspective, you’d want to purchase them pre-IPO and hold onto them until long-term gains kick in. But don’t do that until you have a good reason to believe it is imminent, and only if you can afford to gamble with the money.
Re: Ask HN: How to value share options for pre IPO Employeer
#4Post-IPO they would ordinarily become options to buy the same number of shares. If the company was acquired before then, all bets are off. Extremely likely that investor preferences will consume some of the value in preferred shares, maybe well cash off the top too. From a tax perspective, you’d want to purchase them pre-IPO and hold onto them until long-term gains kick in. But don’t do that until you have a good rea…
Thanks makes sense. The tax on excersising the options post IPO is brutal
Re: Ask HN: How to value share options for pre IPO Employeer
#5Best to keep them at $0 value. Even when there is an emanant IPO there are so many variables that can keep the options at $0 that it's best to look at them as having no value. To top that off, all cases are different so your best bet is to consult an experienced attorney. You might want to get together with others in the same situation so you can share the costs. But don't make a general announcement. Your bosses mig…
Yes will consult with an attorney. Thanks