Got an offer from a pre-IPO startup for 15000 RSUs at a $5B company valuation. Each stock worth $20 (paper money until liquidity event). I accepted the written offer. But waiting to join until 2 weeks, background check etc etc. The week after the company raised a new round of funding and is now valued at $10B. I haven’t joined yet. Did my 15000 RSUs just double in worth ? Edit- for the sake of simplicity i did not include funding raised here but I’m expecting 10% dilution.
Are you sure it's RSUs and not stock options?
@Kong that is completely false. If you don't know what you are saying please don't confuse others
A lot of pre-ipo companies offer double-trigger RSUs. This isn’t unusual.
Read the offer letter. If it specifies 15000 RSUs that’s what you’ll get congrats. If it specifies a dollar value based on FMV at time of grant then sorry you’ll get fewer.
yes if Rsu , no if stock options
It depends on if the wording is grant on dollar amount or by number of units. Some companies do grant on dollar amount especially for new grads. Otherwise, yes. If you got RSUs as opposed to options, the paper value doubled. Congrats.
I read round of funding as ipo. My bad. You need to consider dilution and terms of deal. There are two likely cases. 1) your equity on paper is worth 1.8x at max. 2) your equity is with 0 at min since new round has terms that screw you over.
Kind of. Double valuation does not mean double share price. You need to look at the dilution. A good indicator will be what the preferred share price was on the funding round. You can also look at the secondary market for true value.
Ah good point on the dilution ! As part of the new round the company raised 1B of funding so I’m assuming the other 4B was appreciation of value
In my experience (Instacart + 2 other pre IPO) the dilution is usually relatively small like 2-7% per round.
I'm wondering, how RSUs (not stock options) in private companies are taxed. Vesting RSUs would mean taxable income, but you cannot yet sell RSUs to cover tax...
RSU don’t vest until a liquidation event and usually the 2nd trigger condition. You “get” them but they aren’t converted to shares. Thank FB for this innovation.
What happens if you leave the company?
How do we know about each round dilution ? Is public information?
Let's assume a company is valued at $5B pre-funding and raises $1B for a post-funding valuation of $10B. Also assume that all the $1B is from issuing new shares (i.e.dilution) and not from selling earlier investor's shares. Previously, there were (e.g) 1B shares of $5 each. To get to a valuation of $10B post, the previous shares would be worth (10 - 1) ÷ 5 more now. So, they issue 111M new shares at $9. Dilution is essentially 1 ÷ 1.111, i.e 10% None of this matters, all that matters is that OP's stock is now worth 1.8x more.
It depends. Does it have to go through the board meeting before the RSUs are issued? By then the price would be the new valuation and you would have missed it
Yeah there is a subject to board approval thing. I wasn’t offered a dollar mount, but actual shares. I think it’d be weird for them to be like - you get less shares now.
Weird but not outside of the realm of reason. It might have made sense to give you 15K shares at the previous valuation, but the board may feel differently now based on the new valuation. Either way, if they change your offer to give you fewer shares, it’s a jerk move on their part.
It’s not just dilution. Board approves your RSUs at the next board meeting based on the new valuation. So if it’s issued shares the price is likely locked in at the later price. So they might be worth half now
Yes, but 2 * NaN = NaN
Yep ! Paper money !
But don't worry - I was there too and now it's real :)