If they are currently valued at $1300 each with a private company valuation of $1B that means: You have to pay $1300 per share to acquire them and have no ability to sell them. If the company goes public or acquired the company will have to be valued more than $1B for the options to be worth anything to you. Honestly you shouldn't ever consider options to be worth anything more than the paper they're printed on until…
The main thing we need more detail on is whether the $1300 number is the per-share preferred share value (= $1B / number of shares or a per-share 409a valuation / strike price.
Ask HN: How do I gauge the value of stock options that I have been offered?
51–58 of 58 posts
Re: Ask HN: How do I gauge the value of stock options that I have been offered?
#52$1300 is really an unusually high strike price. While in theory there is no difference between 200 options at $1300 per share and 20k options at $13 per share, the former is very unusual and I'd at least want to know the story. If the company is to IPO there will almost certainly be a stock split. One way to force small stakeholders off your cap table is to do a reverse stock split because fractional shares are typic…
I'm curious now which company this is, because that kind of price doesn't pass my sniff test. In fact I'd steer clear altogether.
Re: Ask HN: How do I gauge the value of stock options that I have been offered?
#53Ask for more cash and hand back the options, invest the cash in your retirement or property or whatever. You don't have enough years to play the same lottery as VC's. The mere fact you are asking how to value these means you are probably in no position to do so, therefore you are probably getting a terrible deal.
@chillydawg, Based on the options they have been offered (200 * 1300 = 260,000), What reasonable amount of money do you think they should ask for on-top of their salary, if they forego the options?
Re: Ask HN: How do I gauge the value of stock options that I have been offered?
#54Given the company looks like a unicorn, i assume there wont be much difference between this and a fang company in terms of interesting stuff to do.
Re: Ask HN: How do I gauge the value of stock options that I have been offered?
#55Re: Ask HN: How do I gauge the value of stock options that I have been offered?
#56Keep stock options as possible bonus in future. It may or maynt happen. If its very small company with only handful no.of employees and you see this company has bright future or may get acquired for billions - then try to understand how they arrived on number 200. If you faith in product & planning to stay for 4+ years. - You can tell them increase options with may be increased 5 year schedule. If you think your basi…
Re: Ask HN: How do I gauge the value of stock options that I have been offered?
#57First, the options are worth nothing, especially if you don't have a market. The strike price is pretty much meaningless (although in your case unusually high). Even if you IPO'd at this strike price (and you won't), you'll really only care about how much the actual stock price moves from that strike price.
Second, there are inevitably investors that have options with greater preference than yours. Before you IPO, your management is going to use the opportunity to shuffle equity around. In my case, the directors performed a reverse split that halved the number of my options and doubled the strike price. The directors/early investors got a better split, hence equity was shifted from employees to the upper level. Expect this is coming (and from your strike price seems like it's already been done at least once).
As a cautionary tale, I actually "own" (not entirely vested) quite a few options compared to my fellow employees. They are literally worth zero dollars. The only employees in my company that got anything were the really really early ones.
tl;dr: if your company ends up being a unicorn these options might be worth a lot; if your company is outstanding they may be worth a little; if your company is typical they'll be worth next to nothing or nothing
Re: Ask HN: How do I gauge the value of stock options that I have been offered?
#58If they are currently valued at $1300 each with a private company valuation of $1B that means: You have to pay $1300 per share to acquire them and have no ability to sell them. If the company goes public or acquired the company will have to be valued more than $1B for the options to be worth anything to you. Honestly you shouldn't ever consider options to be worth anything more than the paper they're printed on until…
Doesn't that depend on whether they are RSU's? Then there is no strike price as far as I remember only capital Gains.
Capital gains tax only applies to the difference of sell price and grant price.