equity, stock-optionsI’m offered 40,000 options in a startup. The options vest over 4 years (vest immediately if company is bought or goes public) and cost $0.50 each. How do I figure out how much they are really worth? I don’t know the total number of outstanding shares in the company which is too bad, because I think I can make an educated guess of the possible sale price of the company.
Somebody suggested that if I could find out the price of the preferred shares bought by investors it would be useful. If I understood him correctly, the idea is that the investors know what they are doing and pay a fair price for their shares. But how are my options related to preferred shares? I’ve been told that the price is often set at 10% of the price of a preferred share. Does this mean it takes 10 common shares to make 1 preferred share? Or do they just give employees a low cost basis?
As you can see, I’m having trouble even getting started with evaluating the offer. I.e. what questions do I need to ask?
Thanks, Dave
Ask the HR / CEO whoever is making you the offer
The company offering you the stock options should be willing to give you a fair idea about the current value of those options. You can tell them that information is important for you to compare their offer to another one you have.
Check the company registration details online
Depending on the company’s country and state of registration, you may be able to get the details like authorized and issued shares online by paying a small fees. Many jurisdictions have strict timelines within which any change in shareholder information should be submitted to the registrar, so the data may often be up to date for funded startups. At least, the number of authorized shares is always accurate, since the registrar authorizes them.
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