My company sold for $100M and I got zilch – how can that be? • Hacker News Board

Re: My company sold for $100M and I got zilch – how can that be?

#371

Post by nl » Sat, Oct 26, 2019, 11:17 PM UTC

dragonwriter wrote: post #367

WalterBright wrote: post #366

Earlier quoted context omitted.

> If the stock is worthless, why offer it? It wasn't worthless when it was offered, the overhang deals did not come until much later, and it did not become worthless until the company sale price was agreed upon. The stock would still have been worth something if the sale price was higher than the overhang. Getting stock does not mean it can be diluted by further stock issuances. There is no deceit there. > Literally…

> It wasn't worthless when it was offered As a practical matter, it was, since it wasn't liquid and had no security against changes which would eliminate it's theoretical value before it became liquid. It could have become worth something with the right set of future conditions, but those obviously did not materialize.

Lack of liquidity is not the same as worthless.

The lack of liquidity is a factor in the price.

Re: My company sold for $100M and I got zilch – how can that be?

#372

Post by WalterBright » Sat, Oct 26, 2019, 11:48 PM UTC

4ntonius8lock wrote: post #370

WalterBright wrote: post #369

Earlier quoted context omitted.

> The employee was offered 1% of the company. No, they weren't. They were offered stock. Stock can always be diluted by future stock issues. > Reasonable, everyday people will understand that to be 1% of all money that comes in on a sale after paying legal fees and bond holders. People who accept stock options and don't bother to learn about them have only themselves to blame. The information isn't hard to come by, i…

> They are not, or they would be priced the same. If this was market based, you'd be right. But if it is legislative based, then this is the definition of circular logic. Given that the structure of preferential stock is legislative based, it is circular reasoning. I count risk based on what percentage of a person's net worth and potential earnings are tied up in the securities. That renders a different perspective o…

> Which is an argument that lacks intellectual cohesiveness when you are simultaneously supporting the legal structure that removed such a situation from the average investor.

Not exactly. The courts are there to enforce the contracts, and protect against fraud. They are not there to protect people from making ignorant decisions and failing to do things like read the contracts they sign. They are not there to remove risk.

Some people say that free markets don't work unless there is perfect information on both sides. This is incorrect. Imperfect information is called risk and is always priced in. The overhang in stocks comes about because investing in the company is perceived as extremely risky.

Re: My company sold for $100M and I got zilch – how can that be?

#373

Post by nearbuy » Sun, Oct 27, 2019, 12:36 AM UTC

vast wrote: post #338

nearbuy wrote: post #291

Earlier quoted context omitted.

You cut off the quote too early: > Again, let me emphasize, this is not inherently unfair. [...] The problem is most companies hide it. The author is saying it's not inherently unfair if the company is honest and upfront about it.

It is unfair if a bridge loan is involved. If the preferred stakeholders have the chance they will remove the commons from the equation. In the end both sides take a risk with their shares and it is usually more meaningful to people with little money.

In the example, the common shareholders didn't make a profit because the company didn't make a profit. Ignoring the bridge loan for a moment, after all their expenses, the company just managed to make back what was put in.

The hypothetical bridge loan in this case did earn a profit, but it was a high risk loan. The company was going to be insolvent in 60 days and they hadn't yet found a buyer. The lenders got a multiplier because they risked losing their $10 million loan.

This bridge loan certainly could have been unfair, depending on whether the riskiness was worth the multiplier (for instance, if the company took a loan with 100x multiplier, it would clearly be abusive). If that were the case, the minority shareholders could sue and would win.

Re: My company sold for $100M and I got zilch – how can that be?

#374

Post by shess » Sun, Oct 27, 2019, 1:56 AM UTC

mattmaroon wrote: post #346

vanniv wrote: post #307

Earlier quoted context omitted.

Then you have a lousy business model, and you aren't going to make lots of money, and you aren't going to create lots of value, and, as a result, probably won't get a massive payout.

I don't think that's true. Uber's business model is the same as every cab company, but better. It's just a temporary problem (competition forcing them to sell below market value) that they need to overcome. Their financial struggles are due to them pricing well below what taxi cabs do. But if Uber priced the same as cabs they'd still be an infinitely better service and make lots of money, once Lyft isn't there underc…

Are you arguing that the US airline industry spins profits? I mean, sure, you have some carriers like Southwest which do, but as a friend of mine once put it, the US airline industry exists mainly as an outlet for Boeing to sell airplanes...

Re: My company sold for $100M and I got zilch – how can that be?

#375

Post by a13n » Sun, Oct 27, 2019, 1:57 AM UTC

cortesoft wrote: post #191

a13n wrote: post #48

Earlier quoted context omitted.

It's also interesting to consider the role SoftBank has played in this shift. Whoever takes SoftBank money will have the deepest pockets and will be able to play hard against competition. This means you're pretty much forced to either take SoftBank's money, or compete against someone else with SoftBank's money. They don't care much who takes their money, because either way they have the most funded pony in the race.

In certain fields, sure... but even SoftBank isn't investing in EVERY market. Not everyone has a SoftBank funded competitor.

Sure, only the markets that are worth investing billions into winning

Re: My company sold for $100M and I got zilch – how can that be?

#376

Post by [deleted] » Sun, Oct 27, 2019, 8:25 AM UTC

superqd wrote: post #319

greggman2 wrote: post #288

Earlier quoted context omitted.

I'm surprised how many people don't get this part. Person A, investor puts in $100k Person B, employee gets paid $100k Company fails. Person A lost $100k Person B gained $100k This is why person A gets the lion's share of the rewards if the company succeed. Person B risked nothing. Person A risked $100k. The typical retort from Person B is they could have gone to a different company so their risk was to work for this…

There is a deep flaw in this logic. Person A and Person B are both investing the same amount, just in different forms. Person A converted their 100k into 1 year of time . Person B converted their 1 year of time into 100k of money . They both put in 100k of something , B put in 100k worth of time, A put in 100k worth of money. If we assume a fair market rate for the conversion, then essentially this is a perfect excha…

[deleted]

Re: My company sold for $100M and I got zilch – how can that be?

#377

Post by greggman2 » Sun, Oct 27, 2019, 8:28 AM UTC

superqd wrote: post #319

greggman2 wrote: post #288

Earlier quoted context omitted.

I'm surprised how many people don't get this part. Person A, investor puts in $100k Person B, employee gets paid $100k Company fails. Person A lost $100k Person B gained $100k This is why person A gets the lion's share of the rewards if the company succeed. Person B risked nothing. Person A risked $100k. The typical retort from Person B is they could have gone to a different company so their risk was to work for this…

There is a deep flaw in this logic. Person A and Person B are both investing the same amount, just in different forms. Person A converted their 100k into 1 year of time . Person B converted their 1 year of time into 100k of money . They both put in 100k of something , B put in 100k worth of time, A put in 100k worth of money. If we assume a fair market rate for the conversion, then essentially this is a perfect excha…

They are not equally invested. using your method

Company fails

A risked $100k money got 0.

B risked $100k time got 100k money.

A is now at -$100k

B is at zero

My guess it's you'll claim A got $100k of your time so A is at 0 as well but if we follow that logic in other places we can see how it doesn't work.

A pays $10 for B to make a pie

B pays $10 of time to make a pie

A now resells pie for $20. A does not own B any percentage of profit. That's the business success case just replace "pie" with "business". Similarly A drops pie. B does not owe A a new pie. That's the business fail case. $B got their $10 money for their $10 of time. B's risk has now been paid for. A still has a risk, that they can sell the pie. Replace "drops pie" with "business fails".

Re: My company sold for $100M and I got zilch – how can that be?

#378

Post by mattmaroon » Sun, Oct 27, 2019, 1:55 PM UTC

shess wrote: post #374

mattmaroon wrote: post #346

Earlier quoted context omitted.

I don't think that's true. Uber's business model is the same as every cab company, but better. It's just a temporary problem (competition forcing them to sell below market value) that they need to overcome. Their financial struggles are due to them pricing well below what taxi cabs do. But if Uber priced the same as cabs they'd still be an infinitely better service and make lots of money, once Lyft isn't there underc…

Are you arguing that the US airline industry spins profits? I mean, sure, you have some carriers like Southwest which do, but as a friend of mine once put it, the US airline industry exists mainly as an outlet for Boeing to sell airplanes...

That was true for a long time but hasn't been for awhile. They now are mostly profitable. Delta makes almost as much as Southwest and the other majors are still in the billions.

Re: My company sold for $100M and I got zilch – how can that be?

#379

Post by [deleted] » Sun, Oct 27, 2019, 10:18 PM UTC

SparksZilla wrote: post #15

toomuchtodo wrote: post #5

Earlier quoted context omitted.

In no particular order: https://www.holloway.com/g/equity-compensation (The Holloway Guide to Equity Compensation) https://gist.github.com/jdmaturen/5830b83c1425c4767f7e1bd4c9... (Who pays when startup employees keep their equity?) https://gist.github.com/yossorion/4965df74fd6da6cdc280ec57e8... (What I Wish I'd Known About Equity Before Joining A Unicorn) https://gigaom.com/2011/06/05/5-mistakes-you-cant-afford-to-..…

Andy from Holloway here. Our equity comp. guide is 100% free. We also have a Guide on Raising Venture Capital (340 pages). We made sure to include an entire chapter on "Assessing Whether to Raise," which includes sections on alternatives to VC and how VCs can control your company. If anyone on here wants to buy it, you can get a 25% discount on it using this link: https://www.holloway.com/rvc?vip_code=VIP25

[deleted]

Re: My company sold for $100M and I got zilch – how can that be?

#380

Post by nl » Mon, Oct 28, 2019, 1:39 AM UTC

superqd wrote: post #356

vsl wrote: post #340

Earlier quoted context omitted.

> and hence should split the reward equally Are you saying that when a company fails, all employees should return their past salaries paid by that company? Because that’s what splitting the (negative here) reward equally with investors would mean.

No, that doesn't mean that at all. If a company fails, investors don't have to return the time they've invested by putting in extra years of work, so it follows that those who invested time wouldn't return the money they received. Investor A puts in 100k of dollars, the company fails they've lost 100k worth of dollars. Worker B puts in 100k of time, the company fails, they've lost 100k worth of years. The point is, t…

Investor A puts in 100k of dollars, the company fails they've lost 100k worth of dollars. Worker B puts in 100k of time, the company fails, they've lost 100k worth of years.

This is complete nonsense.

The worker has received $100k for their time and keeps that money. The investor has nothing.

If you try to argue that the workers wage doesn't count for some reason, then you also should argue that the investor's time counts the same as the workers did. Either way the investors is worse off.