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Comment by gkoberger | Hacker News Reader

They've raised this round to provide liquidity to former and current employees.

Yes -- after the general peak of tech stocks about a year ago.

If you are a smaller Stripe equity holder, you're feeling "Wow, I would've sold last year and made a killing compared to the prices I'm getting now!", and it's not unreasonable that this same liquidity event would've commanded higher prices a year ago.

Of course, in reality, it's not a given that any individual would've timed the market perfectly. But because nobody had the opportunity to try, everyone feels like they would've been rich(er) if only they had been allowed to sell.

Stripe made a tender offer to equity holders in 2021 at the $95B valuation. Maybe not as high as it could have traded up on the stock market at the same time but not chump change.

Years too late and diluting their valuation even further

There shouldn't be any dilution. All new shares being sold to investors are 1:1 with stock from the employee pool

That doesn't account for the new shares being (presumably) preferred while the purchased stock are common stock.

When you do a private tender offer like this, either the company or the new investors purchase common stock from employees. It's possible Stripe is issuing some preferred shares to investors as part of the transaction, but that is being offset by it acquiring common stock from employees (eg: issue 100 preferred, buy back 100 common. Net result: 0 dilution to the cap table).

If they are swapping common out for preferred, and I don’t know that they are, the functional result is dilution even if the number of shares stays the same.

That's not true. Dilution is based on the number of shares, not the price.

Common vs preferred stock only matters in the event of same or liquidation if a company - preferred is paid out first. At IPO, both kinds of shares convert into the same public class of stock (with the rare exception of founders creating a special class of shares for increased voting power).

They do both typically convert to the same class at IPO, but preferred often has a conversion ratio — that is, it isn’t always 1:1, the way common is.

Functionally dilution should be considered in the full context of the financial outcome unless we are talking about voting rights and I wasn’t. For small shareholders the only real value of stock is money. If it is worth less money then its value has been diluted.

If there are no new shares, it's hard to prefer them.

You can have no net new shares while still swapping common for preferred. I don’t know if that’s what’s happening here.

And forced to sell at a 50% discount because of it.

No one has to sell. That part is optional. This allows employees and former employees to receive shares and to pay the taxes due on receipt. Paying taxes at low valuation is a win.

> Forced to sell at a 50% discount (if they want liquidity)

Obviously no one is literally forced to sell. Is this really that hard to understand? This entire thread is about how by not going IPO, the employees were unable to sell. I'm sure they would have preferred to sell a few years ago instead of paying less taxes now.

It also seems that some employees' options are expiring, so while they aren't literally forced to sell, in reality, they are.

They're forced to execute their options, not sell their shares.

That's true but the reality for many will be selling at least the amount of shares to cover the cost of executing their options. And because the next window to sell could be undetermined (possibly many years in the future), many employees will find it prudent to get liquidity that would cover their cash needs for the next fair-number-of-years. (Based on their understanding of what their stake is worth now. Of course they're going to have that number in mind even if it wasn't able to be realized until now...)

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