My company is granting common stock options using the preferred stock FMV but not disclosing this to employees. Is this common practice or should I start looking for a new job due to deceptive leadership?

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Definitely not common practice. Most places groan when the 409A returns an exercise price that’s too high since the goal is to help grease the wheels of employee retention. Doing the opposite feels like sticking their finger in your eye for no reason at all.

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I couldn’t think of a better expression to capture how I feel right now

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They should do a 409A to value the CS (which should be cheaper). Sometimes startups will use Pref as a shortcut when they coming up too close to a financing to do a 409A but this isn’t quite correct. More bad governance and growing pains rather than deceptive leadership.

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We have one and CS is significantly cheaper

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F

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As an ECVC attorney at gunderson we get comp stats at startups, and this is incredibly atypical. Usually my clients try to fight the 409A firms for a lower price so this is odd

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Do you know if the board has VC on it yet or if the company has legit counsel? This could be management just being very uninformed (sometimes in early days founders confuse how strike prices/409A works— I’m not sure what interest they could have in setting your strike price too high)

They’re not misinformed- they’re giving the highest level of management CS FMV and everyone else PS FMV

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