If they say $100k stock options first year, what does it mean?
Number shares “buy right” 14,285
Strike price $5
A. They are not giving $100k since you pay $5 strike price. 100k/14285 is 7. You are only getting $2 per share so value should be just $28,571.
B. If the value is $28,571, they wouldn’t say that they are giving $100k. OP, You are missing something. Please explain.
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comments
You’re assumption in A is correct that the amount you would net is: current price - strike price = your gain. But since the company is private, you shouldn’t really care that it’s only $2 difference per share. If you care about current value in your TC… you shouldn’t work for a startup.
In most cases companies are purchased by another larger company. When this happens, there is a price per share determined based on the sale. (And it will likely be higher than that $7 in your example) Usually, at the time of sale options you’ve vested are sold (at that sale price valuation) to cover your strike price and you are given cash for the remainder (most common) or shares in the new company (least common unless you are senior management).
Blind has a way of equating “value at work “= TC. If you’re able to look past that: if you believe this company is building something worthwhile that will have great value in the future, then that’s a great place to work, make lasting friendships, and grow your skills/career. TC in the moment be damned.