
Square Takes an IPO Bullet for All of the Overpriced Unicorns - jackgavigan
http://recode.net/2015/11/06/square-takes-an-ipo-bullet-for-all-of-the-overpriced-unicorns/
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branch23
For those more well versed that I in employee stock options, what does this
mean for employees with equity options? I assume it's quite dillutive and will
make options granted after last funding round worthless assuming share price
stays at ipo price ?

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jackgavigan
Whether it's dilutive or not isn't as big a deal as what the options' strike
price is.

If Square has issued options with a strike price based on the Series E share
price (which appears to be ~$15.46), then those options are looking like
they're going to be under water. It's not unreasonable to assume that the
options would be issued at a discount (because they wouldn't have the
guaranteed return provisions provided by the ratchet) but there's no way of
knowing if that's the case and, if so, what the discount might be.

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branch23
agreed, but the article also mentions that square may have to issue more
shares in order to satisfy guarantees it made to investors in previous rounds.
How might this affect the financial position of employees with options granted
at the series E share price?

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jackgavigan
The number of shares only matters in so much as

(Number of shares) x (Share price) = (Company valuation)

Implicitly, if investors take the view that Square is worth a certain amount,
then increasing the number of shares will reduce the value of each share.

The shares Square will be issuing to its Series E investors are designed to
increase the proportion of the company that they own so that, even though the
pie is smaller, their piece of the pie remains a certain size. In principle,
everyone else's share of the pie is, therefore, smaller and less valuable as a
result.

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jackgavigan
_As recently as September, the company [Square] handed out stock options to
staff — one of the main perks of jobs in the Valley — valuing it at $15.39 a
share, or more than 50 per cent above what the shares were deemed to be worth
only six months earlier. But less than two months later, a more sombre picture
is sinking in. Square’s assessment of what its shares are now worth is closer
to $12 each._

Source:
[http://www.ft.com/cms/s/0/6ad992e6-8792-11e5-9f8c-a8d619fa70...](http://www.ft.com/cms/s/0/6ad992e6-8792-11e5-9f8c-a8d619fa707c.html)

