As above, received offer this morning from preIPO unicorn. Valuation just hit $1bil this year, can't reveal identity. Company doesn't seem to have a clear path to IPO and is still working on monetization to be profitable (currently it is breakeven I think). Raising series D this year. Assuming I leave before it IPO or gets acquired is the stock options worth anything? I understand that ISOs have 90 days to exercise from my last day, and there is a secondary market for preIPO stock. Is there sufficient liquidity that one can cash out stock options? Also what other gotchas to look out for when leaving before liquidation event?
Stocks of pre-ipo companies typically don't have any value. Some ways in which you could make your situation better: 1. Company offers to buy back shares from employees at a fixed price. This price will be at a discount to the preferred stock price at the time, but, will normally be higher than FMV. Usually, there are some qualifying conditions thst need to be met. It could be duration of employment (2 or 3 year min) and/or whether you're currently employed. 2. You find a company like ESO Fund or Shares Post to loan money to exercise your options. It is typically hard to negotiate good deals with them because your stock option would come with transfer restrictions. 3. You negotiate the exercise period after you leave to 7 or 10 years. But like you noted, the options get converted to NSOs 90 days after you leave. Other topics you should read up on is disqualifying disposition of ISO, long term and short term treatment of stocks and AMT associated with option exercise.
Unicorn.. 😂.. I’m wondering how many 🦄 will be there in 6 months time
Until the company is public there is no value associated with any stock unit.
The stock units are illiquid, but to call them valueless is wrong.
Serious question not meant to troll - How is it that a non public company’s stock units are not valueless? I understand there’s a theoretical value to them if the company were to go public but “illiquid” and “valueless” in this instance are one and the same. Is there any current value to your RSUs at Uber? No, there is not. There may be an assigned FMV to them but in this instance they are not only illiquid but also valueless as you would get no return on your stock units as you cannot sell them. As far as I know there hasn’t been any sort of liquidity event that has triggered at Uber to allow and employee to sell their units.