If you are looking to liquidate the company, then yes, the goal is to get cash when you can. But if you are looking to create a growth story to attract employees, partners, future investment, you may want people to think there is an upside to the stock.
Yeah, there's also general morale among the rank and file.
Everyone's locked up for six months (except a few directors who are selling into the greenshoe). You can tell people to not even look at or think about the price for six months but human nature is what it is. Everyone's going to look at the IPO price and mentally anchor that as the minimum that they'll be able to cash out their options for. Most people will mentally come up with a range of IPO price as the min and some much larger price as the max.
To have the price immediately start dropping like this is not great for employee morale.
The execs can't, like, force the underwriters to exercise the greenshoe, so they'll be stuck holding the bag until the price rises above the IPO price, in that regard.
But isn't it likely that their strike price is much, much lower than the current price? If so, it's probably not that bad if the stock is down even 20% when they are able to sell. Obviously it's better if the stock price is higher, but it's not like they're going to be selling at a loss.
Eh... Uber gave me a job offer in October 2019 claiming an internal valuation of $120B. I found it to be completely unjustified and passed on the job, but I'm certain many others bought it hook, line, and sinker.
There were some really incredulous claims around the TAM of Uber Eats (and other efforts) that were proven outrageous in the S-1 filing.
The 409A valuation was $70B or whatever, but they were selling the equity as though it was already worth 70% more than the paper value. (Hence the distinction between their "internal valuation" and the 409A). It was super sketchy. Basically trying to argue that the offer they were giving me was already worth a ton more than it was.
Nope. It was October 2019! The paper valuation was whatever their last raise was (~$70B or whatever), but they were sandbagging on the equity and framing it as being worth far more than it was on paper.
> If you are looking to liquidate the company, then yes, the goal is to get cash when you can.
Not liquidate the company, raise money to fund user growth or tech development.
> But if you are looking to create a growth story to attract employees, partners, future investment, you may want people to think there is an upside to the stock.
In that case what matters is what happens over the next year, not what happens over the next week. If they fell to $20 this week and then stayed there for a month before gradually starting to go back up, all the better for future employees and investors who get to buy in at the lower price.
While you're right that long-term matters more, you have to think about the short term implications:
- People who joined late-stage, and that may have taken a lower salary for the upside once they IPO'd.
- Recruiting new people could be come a lot more difficult if the perception is that the stock is worth a lot less.
On top of that, after patiently waiting for years that an IPO is going to be when the fruits of their labor are reaped, but no actually it could be much later than that is not likely to help retention.
