
Ask HN: Company quietly did stock split, implications for options? - throwawayOpts
Hey HN,<p>I was a software engineer at a US startup now considered a unicorn and recently in the news.  It&#x27;s got the right market, revenue and profit to have a liquidation event soon.  I&#x27;m very concerned about a situation regarding my employee options and need advice on how to proceed.<p>I found out from friends higher up in the company that the company did something very quietly and I&#x27;m not sure exactly how to proceed.  While still working there, between the time I started vesting options and the time I left the company they performed a stock split.  I didn&#x27;t notice this at the time but the options listed in the initial offer letter are the same as the number executed when I executed my options.  It seems like they didn&#x27;t follow through the stock split.<p>1. What do I do?
2. If the situation is as it seems, is there any legal recourse?<p>Thanks
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finsrud
Read your company's stock option plan.

Most stock option plans have language that _auto-adjusts_ all outstanding
option awards in the same proportion as the stock split.

For example, if the company did a 1:5 stock split, your option award would
also split 1:5.

So... if your company's stock option plan has this standard auto-adjust
language, a stock split is likely a non-issue.

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throwawayOpts
After seeing a few of these comments, I think I'll clarify.

I'm aware of how stock options should work under stock splits. As others have
said, in general, whether it's options or shares, the equity on each side of
the split should remain constant. IE 3x the shares, 1/3 the value. In the case
of options 3x the options, 1/3 the strike price.

My issue is that it's clear that the option amount did not auto-adjust. I've
already executed the options. The kicker is, neither did the strike price. It
looks like not only did I not get the number of shares from the options I
vested when executing them, I overpaid for the ones I did get since the value
didn't change. This likely means they're underwater and worth zero.

I guess my next step is to contact their law firm and see if I can get
confirmation from them about the split, then I can push them to correct it.
(through legal means if necessary)

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fred_is_fred
Stock splits seem to be something that for some reason reasonably smart
engineers view as some type of financial scam. A split is simply a way of re-
arranging the equity - a split in itself neither creates, nor destroys value.

I've tried over the years to come up with a decent analogy and this is the
best I can do. Imagine your options are cartons of eggs, and you have 5
cartons. A carton of eggs is worth $2. You have $10 worth of eggs. However the
people that decide how eggs are sold determine that eggs should be sold in
bundles of 6 for $1 each. You cut the cartons in half. You now have 10 cartons
of eggs, still worth $10.

This was not in done in secret in some kind of way to scam you. Unless there
are different stock classes, this will impact every investor. You should
probably contact the company holding the options, Merrill, Fidelity, etc, and
confirm that it will be updated.

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planteen
If it's publically traded, yeah, nothing nefarious happened. But if it's
private, all bets are off. Often, options there are nothing more than a couple
of pages of paper tracked by the company itself. It may very well require
legal advice to unwind what happened.

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sb8244
I went through this in the past and my options auto updated and exercising
them was not a problem (1/x) price per share for (n*x) options.

IANAL but I don't believe the company could legally split stock without your
options being affected, because they're materially changing the promise of
what you are owed. Also your options have real impact even before you exercise
them, because you can do things like pay the taxes early. If you did this and
the value materially changed, it wouldn't line up.

