I know I'm very naive with stocks and startups, but I understood that when my stock options vested I could exercise them, and then they were mine to hold until I wanted to sell. Presumably when the fair market value had improved. I recently learned that employees who left our company had their vested stocks paid out, at FMV, which is essentially nothing. Is this normal? Feels shitty to me. The people who left were on discounted salaries, and being punished for not sticking with company until it's inevitable success ... I have learned about "claw back" clauses, and I don't see any language in my material around this. I know I need to get a lawyer to read this over, but I thought I'd ask here in the short term.
It's common, and yes, it's shitty
I excercised my options when I left a start-up years ago and those were worth zero when the company was acquired later.I ended up losing a few thousands.
How did it end up being zero?
Preferred stock gets paid first before common stock. Employees only get common stock.
“I recently learned that employees who left our company had their vested stocks paid out, at FMV, which is essentially nothing.” What do you mean by that?
I don't really know the specifics, but once they left they were given a few hundred dollars for their stocks (I guess they were exercised). And if the company value increases in the future, they no longer profit from it.
Can’t they decline it? It’s illegal
This is precisely why you value private RSUs at $0 when considering the offer.
Company plans will differ on some points but are mostly the same. The standard ones say that they have a ROFR over your stock to purchase the shares if you ever propose to sell the shares to a third party. But there are lots of transfer restrictions as well. And sometimes you will need company’s agreement to sell. Sounds like here your company plan had a term in the plan that says they could buy back vested stock upon termination at FMV.
Not unusual, unfortunately, for privately held companies .