Cancelling shares which had positive value is problematic. It's highly unclear to me why these stock holders would not be given a payout unless there were liquidation preferences. Given the employees may have purchased the shares rather than having been granted these shares - a lack of knowledge on the behavior and existence of said liquidation preferences could give them legal standing.
We really need to see arrangements where the ultimately small pool of employee equity is above the liquidation preference of any investors. The transparency around such preferences is quite suspect.
There is nothing I can see which suggests the shares have positive value. The FAQ I linked directly says the opposite. Nothing is suspect here, other than journalists and internet commentators making assumptions based on misunderstandings.
This happens hundreds if not thousands of times a year at startups that sell for less than the aggregate liquidation preferences.
The oddity here would be that the employees purchased these shares. If money changed hands, the employee would have a reasonable right to know of the liquidation preferences and their cutoff - correct?
> oddity here would be that the employees purchased these shares
You’re purchasing shares when you exercise options.
The oddity is both that these shares were sold to these employees, versus sort of occurring as a matter of course of employment, and that the company seemed to go out of its way to cancel them versus just declaring them worthless while the entity is wrapped up.
We really need to see arrangements where the ultimately small pool of employee equity is above the liquidation preference of any investors. The transparency around such preferences is quite suspect.