[tyre]

Employees get options at common stock prices. The valuations you see, like $12bn, are for preferred stock. So no employees got stock priced at $12bn, but all of them get paid at a $5.15bn valuation.

Not saying they did well, but depending on the 409a valuations, they still might have made money.

Edit: friends, if you’re going to downvote please leave a comment as to why. It’s okay to disagree! There’s a lot of misleading FUD in these discussions about equity. It’s helpful for everyone to hear those sides.

[singron]

Their options should be priced lower, but the common stock isn't valued according to the $5.15B. They raised $300M at $12B and $425M at $7.4B, which are both under water, so those shareholders will use their liquidation preference to get paid at least 1x. Assuming those rounds owned 7% of the company, there is at most $4.4B left for the remaining 93% of shareholders. That's about 8% less. If they deducted fees, legal services, or retention packages or had worse liquidation preferences or more underwater rounds, then it gets even lower.

[jt2190]

> Employees get options at common stock prices.

More specifically, when employees are granted options contracts the strike price of those contracts is based on the last valuation of the company prior to the grant. If all is going well and the valuation is increasing those options are also increasing in value. Here we have a sale which values the company lower than the prior valuation. Recent option grants will likely be underwater, earlier grants would still be profitable.

> The valuations you see, like $12bn, are for preferred stock.

No, the valuation is for the whole company, all of its shares, preferred and common. How this value is distributed among shareholders depends on the deal, but generally there is a “seniority”, roughly: creditors (debt holders) are paid first, preferred shares next, then common shareholders last. This order can be negotiated as part of the sale.

> So no employees got stock priced at $12bn, but all of them get paid at a $5.15bn valuation.

It’s just not possible to know what each individual employee’s outcome is. We don’t know how much of that 5.5 billion will be left over for common shareholders including the employees. Note that employees have received salaries so their overall outcome is greater than zero dollars, but perhaps their total compensation outcome is lower than they hoped for the time they put in.

> Not saying they did well, but depending on the 409a valuations, they still might have made money.

Yes, some might have and some might have not. We just don’t know without more details.

Edit: singron’s answer (sibling comment) attempts to model the employee outcome in a rough but reasonable way.

[tyre]

The way they get to $12.5bn is multiplying the preferred share price by the total outstanding shares. But the common shares, while still included in that calculation, are not worth the same amount of money.

They have a different strike price for options that is set via a 409a.

It’s possible that employees got, at the peak, grants with strike prices at a $2bn 409a valuation. We don’t know. What we do know is that no employee ever got grants with a strike price of a $12.5bn valuation. That’s just not how this works.