Microsoft stock option backdating

However, the premise – that risk and reward are proportionate – isn’t true in the general case.

Only assets whose risk cannot be diversified away carry a risk premium (on average).

This story has a few additional complications which illustrate other reasons options are often worth less than they seem.

Mayhar couldn’t afford to exercise his options (by paying the strike price times the number of shares he had an option for) when he joined, which is common for people who take startup jobs out of college who don’t come from wealthy families.

Let’s say a company raised 0M by selling 30% of the company, giving the company an implied valuation of

However, the premise – that risk and reward are proportionate – isn’t true in the general case.Only assets whose risk cannot be diversified away carry a risk premium (on average).This story has a few additional complications which illustrate other reasons options are often worth less than they seem.Mayhar couldn’t afford to exercise his options (by paying the strike price times the number of shares he had an option for) when he joined, which is common for people who take startup jobs out of college who don’t come from wealthy families.Let’s say a company raised $300M by selling 30% of the company, giving the company an implied valuation of $1B.The most common misrepresentation I see is that the company will claim that because they’re giving an option for, say, 0.1% of the company, your option is worth $1B * 0.001 = $1M.Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.Compensation is much cheaper if you can convince people to take an arbirary number of lottery tickets in a lottery of unknown value instead of cash.

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However, the premise – that risk and reward are proportionate – isn’t true in the general case.

Only assets whose risk cannot be diversified away carry a risk premium (on average).

This story has a few additional complications which illustrate other reasons options are often worth less than they seem.

Mayhar couldn’t afford to exercise his options (by paying the strike price times the number of shares he had an option for) when he joined, which is common for people who take startup jobs out of college who don’t come from wealthy families.

Let’s say a company raised $300M by selling 30% of the company, giving the company an implied valuation of $1B.

The most common misrepresentation I see is that the company will claim that because they’re giving an option for, say, 0.1% of the company, your option is worth $1B * 0.001 = $1M.

Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.

Compensation is much cheaper if you can convince people to take an arbirary number of lottery tickets in a lottery of unknown value instead of cash.

B.

The most common misrepresentation I see is that the company will claim that because they’re giving an option for, say, 0.1% of the company, your option is worth

However, the premise – that risk and reward are proportionate – isn’t true in the general case.Only assets whose risk cannot be diversified away carry a risk premium (on average).This story has a few additional complications which illustrate other reasons options are often worth less than they seem.Mayhar couldn’t afford to exercise his options (by paying the strike price times the number of shares he had an option for) when he joined, which is common for people who take startup jobs out of college who don’t come from wealthy families.Let’s say a company raised $300M by selling 30% of the company, giving the company an implied valuation of $1B.The most common misrepresentation I see is that the company will claim that because they’re giving an option for, say, 0.1% of the company, your option is worth $1B * 0.001 = $1M.Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.Compensation is much cheaper if you can convince people to take an arbirary number of lottery tickets in a lottery of unknown value instead of cash.

||

However, the premise – that risk and reward are proportionate – isn’t true in the general case.

Only assets whose risk cannot be diversified away carry a risk premium (on average).

This story has a few additional complications which illustrate other reasons options are often worth less than they seem.

Mayhar couldn’t afford to exercise his options (by paying the strike price times the number of shares he had an option for) when he joined, which is common for people who take startup jobs out of college who don’t come from wealthy families.

Let’s say a company raised $300M by selling 30% of the company, giving the company an implied valuation of $1B.

The most common misrepresentation I see is that the company will claim that because they’re giving an option for, say, 0.1% of the company, your option is worth $1B * 0.001 = $1M.

Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.

Compensation is much cheaper if you can convince people to take an arbirary number of lottery tickets in a lottery of unknown value instead of cash.

B * 0.001 =

However, the premise – that risk and reward are proportionate – isn’t true in the general case.Only assets whose risk cannot be diversified away carry a risk premium (on average).This story has a few additional complications which illustrate other reasons options are often worth less than they seem.Mayhar couldn’t afford to exercise his options (by paying the strike price times the number of shares he had an option for) when he joined, which is common for people who take startup jobs out of college who don’t come from wealthy families.Let’s say a company raised $300M by selling 30% of the company, giving the company an implied valuation of $1B.The most common misrepresentation I see is that the company will claim that because they’re giving an option for, say, 0.1% of the company, your option is worth $1B * 0.001 = $1M.Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.Compensation is much cheaper if you can convince people to take an arbirary number of lottery tickets in a lottery of unknown value instead of cash.

||

However, the premise – that risk and reward are proportionate – isn’t true in the general case.

Only assets whose risk cannot be diversified away carry a risk premium (on average).

This story has a few additional complications which illustrate other reasons options are often worth less than they seem.

Mayhar couldn’t afford to exercise his options (by paying the strike price times the number of shares he had an option for) when he joined, which is common for people who take startup jobs out of college who don’t come from wealthy families.

Let’s say a company raised $300M by selling 30% of the company, giving the company an implied valuation of $1B.

The most common misrepresentation I see is that the company will claim that because they’re giving an option for, say, 0.1% of the company, your option is worth $1B * 0.001 = $1M.

Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.

Compensation is much cheaper if you can convince people to take an arbirary number of lottery tickets in a lottery of unknown value instead of cash.

M.

Given that VCs don’t, on average, have outsized returns, this seems to imply that employee options aren’t worth as much as startups often claim.

Compensation is much cheaper if you can convince people to take an arbirary number of lottery tickets in a lottery of unknown value instead of cash.

Let’s start by looking at some cynical reasons, followed by some less cynical reasons.Since VCs can and do diversify risk away, there’s no reason to believe that an individual employee who “invests” in startup options by working at a startup is getting a deal because of the risk involved.And by the way, when you look at historical returns, VC funds don’t appear to outperform other investment classes even though they get to buy a kind of startup equity that has less downside risk than the options you get as a normal employee.There are a lot of differences between the preferred stock that VCs get and the common stock that employees get; let’s look at a couple of concrete scenarios.Let’s say those investors that paid 0M for 30% of the company have a straight (1x) liquidation preference, and the company sells for 0M.The non-obvious value of options combined with their volatility is a barrier for recruiting.

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