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Comment by startupfounder | Hacker News Reader

This is correct.

Most employees have a stock strike price that is say $2.00 when the company is valued at $20.00.

So if each Foursquare stock was worth $20 and is now worth $10, the strike price of $2 still allows employees to make $8 per share now.

If you are granted 100,000 shares and wait it out and build the company back up to $20 you will make $18 per share times 100,000 shares for a nice little $1.8M bonus for putting in the hard work.

Maybe because you stuck it out you not only increased the price to $50 per share, but you were also granted 100,00 more stock because you didn't care what TechCrunch said. $9.6M isn't bad for 4 years of hard work...

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"So if each Foursquare stock was worth $20 and is now worth $10, the strike price of $2 still allows employees to make $8 per share now."

"Now" is wildly inaccurate; these are still illiquid assets, so even if this person were to exercise their options, they can't sell yet, most likely (I'd be shocked if they could turn much of a profit selling in the private markets).

And I have no idea what the terms of the new investment are, but I imagine they include some sort of protections for these new investors (I'd put money on them getting their money back plus full participation in a liquidity event). They probably get preferred shares. They probably get last-in/first-out privileges.

If you joined in the last two years, you're probably underwater based on strike price. Even if you're not, if the company has a liquidity event, once these latest investors get their money back, you're probably underwater by then (this new $45m coming off the top, minus any debt, you might split whatever's left -- MAYBE).

If you're an employee, you're probably not going to get anywhere close to $9.6m even if the stock rebounds. That's reserved for the new CEO who turns the company around, maybe some of his top brass.

Do employees have any opportunity to sell their ISOs on the secondary markets if they don't want to wait? No clue how any of that works so forgive me if that is a dumb question.

Tricky question that I'm not 100% sure on the answer of... My understanding is that it depends on the company, the stock agreement and of course finding a buyer. A company like foursquare is probably tough because there is such a risk of the stock being worthless. There are a lot of ways that I mentioned such that most common stock will become worthless, so all of that is factored in.

There's a good document on equity compensation that was recently posted to HN, it has a few notes on secondary markets: https://github.com/jlevy/og-equity-compensation#what-is-your...

but you were also granted 100,00 more stock because you didn't care what TechCrunch said. $9.6M isn't bad for 4 years of hard work

Why stop at 100k stock? What if you were granted 1M shares? That's worth $96M, 10x more!

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