“Those who hold common stock, like employees who bought stock during or after their years at the company, will see their stock canceled under the terms of the agreement, making those investments effectively worthless.”
Get a securities lawyer, sue and then lob a bunch of state and federal complaints against any lawyers or bankers involved. Cancelling stock outside liquidation is bonkers.
orionsbelt•1h ago
Doesn't that just mean the Common was underwater and worthless? It’s another way of saying they are due $0.
How many employees who invested in your company lost their money and/or stock options as a result of this transaction?
A total of 10 former employees who chose to invest in Philz Coffee by buying common stock years ago at much higher prices than the current price of the shares will unfortunately lose the value of that stock. There are no other Philz Coffee common stockholders or broader group of Philz common stockholders who were affected by the transaction and no current employees are Philz common stockholders who were affected by the transaction.
Additionally, out of our approximately 1,500 current employees, 47 were granted stock options (the right to buy stock at a certain price in the future) in 2022 and earlier that are not exercisable based on the current price of the shares. Unfortunately, those options will expire per their original terms, but since the employees did not buy stock, they did not lose any money.
lumost•1h ago
Cancelling shares which had positive value is problematic. It's highly unclear to me why these stock holders would not be given a payout unless there were liquidation preferences. Given the employees may have purchased the shares rather than having been granted these shares - a lack of knowledge on the behavior and existence of said liquidation preferences could give them legal standing.
We really need to see arrangements where the ultimately small pool of employee equity is above the liquidation preference of any investors. The transparency around such preferences is quite suspect.
orionsbelt•1h ago
There is nothing I can see which suggests the shares have positive value. The FAQ I linked directly says the opposite. Nothing is suspect here, other than journalists and internet commentators making assumptions based on misunderstandings.
This happens hundreds if not thousands of times a year at startups that sell for less than the aggregate liquidation preferences.
lumost•27m ago
The oddity here would be that the employees purchased these shares. If money changed hands, the employee would have a reasonable right to know of the liquidation preferences and their cutoff - correct?
pydry•1h ago
It probably means that the series c investors got whole 145 mil payout through a stacked liquidation preference or something.
zamalek•57m ago
This happened at a previous employer of mine: the Nintex acquisition of K2. Not long before the acquisition, employees were offered the "opportunity" to purchase their vested options. I didn't invest, but my friend did (so I'm not sure what the details are). They had the power to band together and cause major problems for the deal (I want to say they could outright block it, but I might be hallucinating that). Once they began to organize they were quickly bought out - no details on how much, though.
Invictus0•1h ago
Sounds like there's more to the story than is being reported
JumpCrisscross•1h ago
Get a securities lawyer, sue and then lob a bunch of state and federal complaints against any lawyers or bankers involved. Cancelling stock outside liquidation is bonkers.
orionsbelt•1h ago
Edited to Add:
Yeah, the above seems right. This seems like standard fare. See the below FAQ from https://philzcoffee.com/stakeholderfaqs:
How many employees who invested in your company lost their money and/or stock options as a result of this transaction?
A total of 10 former employees who chose to invest in Philz Coffee by buying common stock years ago at much higher prices than the current price of the shares will unfortunately lose the value of that stock. There are no other Philz Coffee common stockholders or broader group of Philz common stockholders who were affected by the transaction and no current employees are Philz common stockholders who were affected by the transaction. Additionally, out of our approximately 1,500 current employees, 47 were granted stock options (the right to buy stock at a certain price in the future) in 2022 and earlier that are not exercisable based on the current price of the shares. Unfortunately, those options will expire per their original terms, but since the employees did not buy stock, they did not lose any money.
lumost•1h ago
We really need to see arrangements where the ultimately small pool of employee equity is above the liquidation preference of any investors. The transparency around such preferences is quite suspect.
orionsbelt•1h ago
This happens hundreds if not thousands of times a year at startups that sell for less than the aggregate liquidation preferences.
lumost•27m ago
pydry•1h ago
zamalek•57m ago