[rco8786]

Effectively, yes. If an employee has 10,000 options with a $1 strike that means they can purchase 10,000 shares for $1 each. Since the shares are worth $9 the employee can then sell those shares immediately for an $8 profit, or $80,000.

As far as how many shares Square has, it's much more than 300k. That's just what they're offering to the public. That percentage is listed in their S1 filing somewhere

How many shares they started with. Who knows. Doesn't really matter.

[american158931]

I'm seeing reports that Khosla led a Series A round of $10 million at $0.22/share (http://www.cnbc.com/2015/11/09/square-ipo-will-net-big-win-f...). At a $40M valuation.

$40M/$0.22 = ~182 million shares at that point? So they've almost doubled the number of shares they started with if they're IPOing at 300 million shares. Does that sound like a reasonable bit of math?

[genericresponse]

At a $40M valuation, Khosla got 25% of the company at that time. They have $10m/$.22 shares or ~45M shares of the 182M shares you mention. They're netting $945M (sale)-$10M(invested)=~$409M.

Between Series A and IPO they had roughly 40% of their stake wiped out through dilution. (45M/182M=25%-> 45M/300M=15%) The dilution happened because, during that time Square issued 118M shares to investors in trade for the investor money. The company valuation at each round was determined by: Investment/shares issuedTotal shares outstanding after transaction.