
Ask HN: But are MY shares actually worth something? - alreadytrashed
I have read many times on various HN threads people&#x27;s disdain for taking equity in non-public companies as partial compensation. I&#x27;ve heard them say, &quot;they are likely worthless.&quot; I&#x27;d like to know if they are referring to my particular type of equity.<p>I was offered 5% of the common shares of the profitable (most years) company that I work for because I was an early employee and I&#x27;ve contributed a lot to the growth of the company over the years and the owner wanted to keep me around. In exchange, I accepted my salary being frozen for about 5 years (no raises etc.)<p>Being a common share holder, I am entitled to a distribution each year based on our profit (5% of the profit). This is commonly anywhere between $20-40k (to me). We&#x27;ve had years where it has been zero though due to slower business. Additionally if the company were to be sold, or if I were to leave the company, the company would get a valuation and I would be paid out for my percentage. This seems like a pretty good deal to me. The contract was pretty loose&#x2F;poorly written, but this is how it has been working so far.<p>Can someone tell me if all the advice I always read on here about the non-value of equity is not really intended for my particular equity situation? I really don&#x27;t know a lot about these things, just how its been working so far for me. All of the advice always makes me question if I&#x27;m making the right decision for my career.
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brudgers
The standard "your shares are worthless" advice applies to startups...and in
this context "startup" is used in a very narrow technical sense for companies
that prioritize growth. Typically [in the US] this means that the company
funnels _all_ revenue [and investment] to expenses. If there's a surplus in
revenue, it is spent to increase the value of the company. Amazon is a prime
example. Instead of turning a profit, it built the massive logistical
infrastructure of data centers and warehouses. Founders and investors see
returns based on increases in the value of their equity [capital gain] rather
than as dividends [income]. Salary aside, Bezos makes money from Amazon by
selling his shares; the price of his shares reflect the underlying value of
Amazon's assets [and presumably the discounted value of future revenue]
through the lens of Wall Street.

Businesses with profit sharing are throttling growth [and that's very often a
good thing] because the $20k paid to an employee could theoretically be
reinvested in assets for the business.

So what are your shares worth? Whatever you can sell them for. Read your
shareholder agreement. It is typical for closely held companies to place
significant restrictions on shares sold to employees...probably a good idea to
talk to _your own_ lawyer if you are thinking about selling.

Good luck.

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alreadytrashed
This was incredibly insightful, thank you for your explanation. As far as I am
aware I can only sell the shares back to the company. They are very tightly
held in fact I'm the only one with equity besides the owner.

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nostrademons
Your shares are worth $20-40K/year, give or take. The value of any security is
the discounted value of future cash flows. For many startups this is pretty
unpredictable and often zero; in your case, you have a pretty good idea of
what it will be.

