My wife works for a startup and they granted her ISO options worth $150K (10K options at $15 FMV and they are vested now) and there's an internal talk about merging with a public company early next year. That startup is an unicorn in their industry and been doing great with exceeding ARR and number of customers. So what usually happens when there is an acquisition in high profitability scenarios: Do we get more than the current FMV price or less? I'm sure there will be layoffs, but is there any criteria to keep the talent from startup for a while? TC: 300K YOE: 7
Will depend on the terms of the acquisition and also the terms of your wife’s specific contract. In most cases, employees with stock in the company will either be given a liquidity event (i.e option to sell at the acquisition price) or will be offered stock in the new company on an exchange basis. In some cases the company will remain a separate entity that is just a subsidiary and can still hold its own stock.
We don't see anything about acquisition on the contract and since its internal only for now, no one is really talking about the deal yet at her company.
Not her contract. It will be in the sales agreement.
100% depends on the sales contract the company signs. Your options are to buy company stock, but when the company is acquired / merges the stock will likely cease to exist. If the company stock is bought out, they’ll likely pay you the value of the options without you having to exercise them (or you exercise anyway and it’s the same profit). But they don’t have to buy all the stock outright, there are plenty of other ways to acquire or merge a company that involve dissolution of the original company and don’t necessarily pay out. Basically, it’s totally out of your control. In most cases you should expect all vested stock to be bought out in a liquidity event and anything remaining to either be exchanged for the new company stock at the same value, or for the job contract to be renegotiated from scratch as though you’re a new employee getting a new grant, just possibly with slightly different length / terms.
Your stocks either get cashed out or converted to new company stocks. The value depends on the deal, it could be below or above fmv. You keep the same vesting schedule.
An important question is what preferences exist for the investors (with preferred shares). ISOs convert to common stock, so if company gets acquired for $300M but investor preferences are $250M then they get their $300M and the remaining $50M gets split amongst the common share holders. But if it’s sold for $250M the. Common stock is worthless. But if the acquiring company doesn’t want all its new talent to leave they are likely to issue new grants of the new company’s stock to retain people even if the acquired company’s stock ends up worth little to employees. So it’s complicated…
It depends on the deal.
Yeah but just wanted to see how things usually go when a public company is so Interested in acquiring a startup which us doing way better.