"In a liquidation, common stockholders receive whatever assets remain after creditors, bondholders, and preferred stockholders are paid."

Coupled with what sounds like an already bad financial state of the company... I'm not claiming no foul play, but it looks like there is a reasonable avenue for what is happening.

Right? Can anyone answer this? The article doesn’t go into it.

A follow up question: how can I check that my own stock is not subject to the same terms? Can publicly traded companies do the same?

Common stock holders are last in line. Only if things go well do common stock holders have a chance. And even then they might still get worked.

The common stockholders have voting rights...

It's only a matter of time until those locally owned coffee shops become popular, expand, over-expand, then get acquired.

Can any of you name some, in the southbay and peninsula?

Pretty sure the barista's startup dream wasn't to have the stock they own to be cancelled.

correct, not exercising them would have been better.

There is a bunch of shady and unfair behavior by the acquirers here, but yeah, that line doesn’t make sense. If the options are worthless, then exercising them would have been a waste of money - the CEO was helping this person out!

I think this article was written by someone with lots of outrage and little actual understanding.

I fail to understand why a coffee shop should be taking sides on geopolitical conflicts.

The founders immigrated from Palestine so that's not surprising. They even donate a portion of proceeds to Palestinian aid efforts. Surprised to see they are going under though. They have been a grocery store staple for a while.

if you make coffee at home you can decide yourself whether it’s pro Palestine or pro Israel

Apparently not all that pro-Palestine, if Wikipedia is to be believed:

> At the end of 2023, five employees were sent home from the Gilman Street location for wearing Pro-Palestine pins. Despite asking for a written statement from management about why the pins were not allowed, the employees never received any information from management. The employees were sent home and the entire staff unionized.

In my experience around the SF bay area the vast majority of local or independent coffee shops have a Palestinian flag or stand with Palestine poster right on the front glass.

While I think that your choice in coffee shop has little to no effect on the actual Palestinian country or people, you can always try going local instead of supporting these multi million dollar chains.

To entice investors? Im not a lawyer, but I assume you're perfectly free to try to raise money by selling common stock to investors?

The reason is to protect investors.

The big answer is "no."

I mean, look at Meta. The stock you can actually buy through your broker is not actually a stock that can control the company, so in a very real sense it's not a "share" in Meta. Zuck controls nearly all the "preferred" shares that have supervoting privileges, so he can operate it as though it's essentially a private firm. The board, which in a conventional public company could exercise control over the CEO, has no ability to remove him.

If you raise money, sometimes you just want the money. Other times, you are happy to cede some ownership and/or control. If things go pear shaped, investors want some protection. If things go really well, sometimes they band together and kick you out of your own company. At some point rules have to be codified: the systems for doing this are share classes, voting rights, information rights, articles of association, board resolutions, etc. While you can start a totally new system and run your company using a magical talking stick and rubber duckies on the blockchain, the reality is that just makes it unfamiliar and hard for conventional institutional capital to invest in, it also makes it hard for slow-moving conventional institutions such as banks and lenders to grok your operational process and internal structure, which in both cases generally limits your upside.

Because someone who might invest some money, maybe wouldn't invest that money if they didn't get the preferred class protections?

This is similar to how different credit risks get assigned different interest rates.

Companies failing (or close enough to failing that they restructure and wipe out common) is not uncommon in start-ups. If you want a more or less sure thing, you'll have to work at a more or less sure employer, and the risk/reward will be different.

Now, whether those who exercised their Philz options and paid for the shares, were really aware in what they were doing -- I don't know! But there doesn't seem to be anything explicitly sinister about the way this was set up, or went down -- simply, the business didn't do well enough. Which is too bad, because I think their coffee is actually good.

Yes. Preferred shares give investors their investment back first if things go wrong.

If an investor gives you a million dollars for a piece of your company, and you turn around and sell the company for a million dollars, then the investor gets their million dollars back and you get nothing. Obviously. Any other outcome would be shenanigans.

Under standard deal terms investors get 1x, i.e. their money back. That's all.

It's not. CEO needs to be put in prison.