
Ask HN: What does lower 409A stock price mean for employees? - 409arevalued
My company ($500Mn+ at last raised round in 2015) offered me stock options at $4 when I joined in 2015 (so I have ~3&#x2F;4 of it vested). The last round means my stock is valued at ~12 dollars a share.<p>They recently had a 409a valuation, and came up with a stock repriced at $2.5. Now they have offered current employees an option to reprice their stock, both vested and unvested, but with the catch that if you choose to reprice, you have to stay with the company for 1 year (if not, all stock gets relinquished).<p>We&#x27;ve been given a couple days to make a decision, but there is still a lot of uncertainty:<p>1) Does a lower 409A stock price mean that if we raise money again it&#x27;s ll be at a valuation lower than the last round?<p>2) If we get acquired in next year (which seems likely given the flat revenue and feelers being sent out by CEO), then will the company sell for less than the last round valuation?<p>3) If we get acquired in the next year, then will the vesting perion still end once the year end or will there be a new (shudder) vesting schedule with the acquiring company?<p>There are not too many reasons for me to stay with the company over the next year (lack of product vision, slow growth, lots of leadership leaving etc.) but a big financial upside (if any) would definitely count as a pro.<p>I&#x27;d appreciate anyone with the knowhow guiding us in this since the CEO and board are all making it sound like an opportunity of a lifetime, and I&#x27;m concerned about how true this is.
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relaunched
This is something you should speak with an attorney about.

Some things you should look out for / ask about. Flat / down rounds can come
with more onerous liquidation preferences. Ask about this and see what comes
out. For example, the investors in your $500 million dollar round float you a
lifeline, $30 million more with a 2x preference. What does that mean? Well,
let's say you previously raised $100 million w/ a 1x preference. Now, the
company sells for $250 million, what happens? Well, the last investor gets $60
from the last round, $100 million from the previous rounds. Now, $90 million
gets divided up over the 100 million shares outstanding. That's .90 cents per
share. And I'm not sure what happens from a tax standpoint, but you're going
to want to look into that.

To answer your questions, a 409a has little to do with the price an acquirer
is willing to pay, 409a is used for tax purposes and acquisition price is
based on willingness to pay.

If you believe that the company took money to find an acquirer, and the
metrics won't change substantially, this other stuff doesn't really matter.
It's probably time to move on.

Technically, a re-price with a substantial pivot could have benefits, which
could include a more favorable early exercise for new employees (I don't
believe that would apply to existing employees, but ask a lawyer) and upside
potential if the new strategy is successful.

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segmondy
Who cares what option they gave their employees, you don't have to agree if
you already had a contract in place. Don't sign anything and go speak to a
lawyer.

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matt_the_bass
A good employee stock option plan should have a clause which triggers full
vesting upon major equity events (such as aquisition, etc)

