What happens to your options if the company goes public or gets acquired before you exercise?
What if you exercise but decide you want to sell but the company isn't public?
This seems like only the "first slide's" worth of what a tech employee needs to know about stock options, and not the most important things.
It's also worded imperfectly in parts, with the effect of being misleading.
If you start by looking at the lede and first paragraph, it's unclear who this is for, and seems more like a child's "book report", with no regard for the reader, nor sufficient understanding of the space that's relevant to the reader.
Perhaps this wasn't garbage in 2007, but I'm flagging it in 2025.
However there are some publicly traded (and fairly large) companies that have been around for a while, that also offer stock options (NQSOs) to their employees. Typically they get to choose between RSUs, NQSOs, or a mix. In these cases options are not worthless because the risk of the company going bankrupt is very slim.
1. If you can get assured bonuses instead of stock options, pick that unless it's going to be a unicorn.
2. It's not going to be a unicorn.
The financial class call that uncaptured value, and they have since altered the terms to prevent that. Naturally the company still wants to pretend otherwise so when you hear the TC you add USD to timebomb banana bucks and come out with a USD total.
If you want equity start your own business. You are not in a position to get any of theirs.
Edit: if you get RSUs and you can liquidate without lockup then that's much better. But still worse than cash.
They don't.
* Share Class & Rights (e.g. common stock, voting, etc)
* Tax issues and how they are structured (a friend had to pay a lot even before exercising due to bad legal paperwork)
* Dilution
* "Market price" nonsense for private companies
* Other risks when exercising
* Liquidity
* Boom/bust cycles
* Lots of growing changes might get them to "have to let you go" and you get nothing to show for
[1] Stanford to continue legacy admissions and... https://news.ycombinator.com/item?id=44846130
Today, yesterday, stock options have always been a lottery ticket.
This is embarrassingly bad. Factually wrong on substantive points.
JonChesterfield•14h ago
> When an employee exercises an option, the company must issue a new share of stock that can be publicly traded.
No. When you exercise, you get the stock, but it's definitely not guaranteed to be publicly traded.
For example Graphcore gave people options, which if exercised became stock in graphcore. If you then found a buyer and asked GC to approve the sale, they declined. Not public. Later they revalued that stock at zero.
To a better approximation, stock options work if you trust the company to pay out.
jdcampolargo•14h ago
100%
cyberax•13h ago
From looking at Wiki, the company is basically bankrupt with just $2.7m revenue for 450 employees. So their stock is literally worth nothing.
If they do get acquired by Softbank, employees will get a portion of the sale according to the amount of shares they own. The company valuation won't make any difference.
JonChesterfield•13h ago
For related reading, see "drag along" for why the voting rights attached to shares mean nothing.
https://sifted.eu/articles/graphcore-conditional-sale-agreed...
cyberax•12h ago
JonChesterfield•12h ago
cyberax•11h ago
"Founders' stock" refers to the preferential tax treatment (TLDR: almost zero taxes via QSBS).