One thing I've always wondered.. if as an employee your stock options have a vesting period, and during that period the company is acquired, do you benefit as if you owned those shares? Or is it only on the options that have vested and you've taken up?
A Guide to Stocks & Options for the Startup Entrepreneur (or Employee)
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Re: A Guide to Stocks & Options for the Startup Entrepreneur (or Employee)
#22One thing I've always wondered.. if as an employee your stock options have a vesting period, and during that period the company is acquired, do you benefit as if you owned those shares? Or is it only on the options that have vested and you've taken up?
From what I understand (largely from reading the linked document) is that the employee is likely to have an acceleration clause of some kind that vests your outstanding options after a certain event happens. Common types are single trigger which occurs on change of ownership and double trigger that requires change of ownership and for the employee to leave the company.
There was also something about these terms being negotiated as part of the change of ownership but that kind of thing is completely beyond my knowledge.
Re: A Guide to Stocks & Options for the Startup Entrepreneur (or Employee)
#23Awesome writeup. Thanks so much for doing it.
There's an error in the third paragraph of the equity financing section. The last sentences trails off without ending.
I also have two suggestions for things to add. 1. Are there similar tax issues to watch out for as a founder who owns a large percentage of common stock from the beginning of the company. 2. I think it would be helpful in the convertible note section to have an example of how debt converts to stock like you have an example of how debt converts to cash in a sale.
Thanks again!
Re: A Guide to Stocks & Options for the Startup Entrepreneur (or Employee)
#24Awesome writeup. Thanks so much for doing it. There's an error in the third paragraph of the equity financing section. The last sentences trails off without ending. I also have two suggestions for things to add. 1. Are there similar tax issues to watch out for as a founder who owns a large percentage of common stock from the beginning of the company. 2. I think it would be helpful in the convertible note section to h…
Very helpful feedback; I'll try to take this into account in the next version of the document!
Re: A Guide to Stocks & Options for the Startup Entrepreneur (or Employee)
#25As an FYI, on May 25, 2011 I updated the linked document to a Second Edition that goes into more detail and corrects an AMT explanation and math.