I am trying to understand how stock options works so I have a very basic question around that. Let's say a PRE-IPO company is giving me 20K stock options and strike price is 8$ as of now. What will be my value of stocks if company goes public or if some other company buys it? Does it matter if I am in the company or leave before IPO or buy out happens? Can someone explain with an example by using above values if possible?
You will buy shares at the strike price, and pay taxes on your virtual gains (fair market value at time you bought - strike price). You will be able to sell after IPO + blackout period (6 months usually), or if the company gets acquired by public company you will get share exchange. The risk in quitting before IPO or acquisition is a large dilution that would wipe out the value of your shares.
Let’s say if the strike price hasn’t changed since last 4 or 5 years then does it mean anything?
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You will have to purchase your shares at $8 each. Then you can sell them at whatever price they're going for on the market post-IPO. Their value depends on the market value once them company goes public, there's no sure way to know as valuations are exactly what people do in finance all day and if it were easy there'd be no inefficiencies to exploit. Some companies let you keep your options if you leave. Some force you to exercise by purchasing them within a few months of your departure. It depends on the company.
Let’s say if the strike price hasn’t changed since last 4 or 5 years then does it mean anything?
Means they haven't filed a 409a in the last few years or if they have that the company is completely stagnant