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How do stock options work for employees pre-IPO?

Posted on October 22, 2022 by Author

Table of Contents

  • 1 How do stock options work for employees pre-IPO?
  • 2 Is it good to work for a pre-IPO company?
  • 3 What are pre-IPO stock options and how do they work?
  • 4 What happens to your stock options when your company goes public?

How do stock options work for employees pre-IPO?

If the company is pre-IPO, you don’t have the option to sell your shares unless you go through a third-party service like EquityZen. If the company just IPO’d, you’re likely subject to a 90-180 day lock-up period where you can’t sell either.

Can you lose money on employee stock options?

A cash exercise could make sense if you believe the stock price will go up. However, employee stock options do not guarantee a stock price that goes up. In fact, it is possible that your stock price can go down and that you can lose some, or all, of your money.

Is it good to work for a pre-IPO company?

Joining a pre-IPO company, assuming its goal is to ultimately go public, can have cash flow problems that restrict growth. Salaries paid to key employees tend to be less than market but you may likely get shares in the company to provide additional incentive.

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What happens to pre-IPO shares?

A pre-IPO placement is a sale of large blocks of stock in a company in advance of its listing on a public exchange. The purchaser gets the shares at a discount from the IPO price. For the company, the placement is a way to raise funds and offset the risk that the IPO will not be as successful as hoped.

What are pre-IPO stock options and how do they work?

Pre-IPO Stock Options Young companies can’t offer employees the salaries and perks of more established businesses, but they can lure employees willing to work hard by dangling the possibility of pre-IPO stock options. These employees will own a piece of the company, and the opportunity to become millionaires.

Should you invest in a young company before IPO?

Young companies can’t offer employees the salaries and perks of more established businesses, but they can lure employees willing to work hard by dangling the possibility of pre-IPO stock options. These employees will own a piece of the company, and the opportunity to become millionaires. Of course, there’s also the potential to not make money.

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What happens to your stock options when your company goes public?

Employees may wonder what happens to their stock options when their company goes public. An IPO provides liquidity for the company. It’s also an exit strategy for founders/investors and a way for employees to sell stock too. Assuming you already exercised your stock options, the IPO is probably welcome news.

What does the IPO mean for employees and founders?

It’s also an exit strategy for founders/investors and a way for employees to sell stock too. Assuming you already exercised your stock options, the IPO is probably welcome news. However, keep in mind that there will be a lockup period after the IPO that will prevent insiders (such as employees) from selling their shares.

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