If a company is offering 20% equity what does that actually mean?

sj4088sj4088 Member Posts: 114 ■■■□□□□□□□
Can anyone explain?

Comments

  • networker050184networker050184 Mod Posts: 11,962 Mod
    It's basically stock options that vest over time. Lot's of ifs, ands and buts around it though so definitely read through the offer carefully.
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  • 636-555-3226636-555-3226 Member Posts: 976 ■■■■■□□□□□
    Could mean a few things depending on the wording, but my guess is it means you'll be entitled to 20% of any profits they're making. 20% is a big number, so my guess is it's a new company, an important role, and a LOT of risk of failure. also a lot of potential reward if it goes well
  • the_Grinchthe_Grinch Member Posts: 4,165 ■■■■■■■■■■
    My buddy changed his entire life on a deal like this. Lost his job after moving and was floating around looking for work. Small firm called him (he had interviewed with them years prior, but turned them down...they were still interested) and since he was hard up he took the job. Pay was decent, but they added options/equity to entice him a bit. Three or four months later VMWare buys them out. He made enough to pay off all of his debt (student loans, car, etc) and got brought on to VMWare making big bucks.

    So definitely review it throughly, but if it works out you could do very very well.
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  • DatabaseHeadDatabaseHead Teradata Assc 16, Querying Microsoft SQL Server 2012/2014, CSM Member Posts: 2,712 ■■■■■■■■■□
    Cool story......
  • networker050184networker050184 Mod Posts: 11,962 Mod
    Could mean a few things depending on the wording, but my guess is it means you'll be entitled to 20% of any profits they're making. 20% is a big number, so my guess is it's a new company, an important role, and a LOT of risk of failure. also a lot of potential reward if it goes well

    That's not usually the case with equity offers in my experience. That would be more along the lines of profit sharing.
    An expert is a man who has made all the mistakes which can be made.
  • sj4088sj4088 Member Posts: 114 ■■■□□□□□□□
    That's not usually the case with equity offers in my experience. That would be more along the lines of profit sharing.

    Yeah, I just got more details. Unfortunately it's not the 20% profit sharing. Of course I already knew that. This is a major company already making billions. So basically it's kind of like what you said earlier, stock options that vest over time. Still don't know how the 20% come into play. 20% of what? I'm going to have to get in contact with HR.
  • soccarplayer29soccarplayer29 CISSP, CISA, PMP Member Posts: 230 ■■■□□□□□□□
    Since you say it's a large company it obviously wouldn't be 20% of what the company is worth or anything like that. I'm guessing it's like a bonus structure and you're eligible to receive vesting stock options each year equivalent to 20% of your base salary. Then they'll probably have metrics/performance stuff you'll need to hit in order to obtain that 20% and then the stock options will vest over time.

    Pass along more details when you hear from HR!
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  • sj4088sj4088 Member Posts: 114 ■■■□□□□□□□
    Since you say it's a large company it obviously wouldn't be 20% of what the company is worth or anything like that. I'm guessing it's like a bonus structure and you're eligible to receive vesting stock options each year equivalent to 20% of your base salary. Then they'll probably have metrics/performance stuff you'll need to hit in order to obtain that 20% and then the stock options will vest over time.

    Pass along more details when you hear from HR!

    Update**

    I get a 20% sign on bonus, 20% cash bonus and 20% equity bonus. I needed to read the fine print closer. Still need to confirm with HR though.

    It's a 110K salary. So I get a 22k sign on bonus, 22K cash bonus and another 22K of stocks vested over three years. So 176K total. Pretty sweet!

    Of course the bonuses are if I hit certain metrics.
  • DatabaseHeadDatabaseHead Teradata Assc 16, Querying Microsoft SQL Server 2012/2014, CSM Member Posts: 2,712 ■■■■■■■■■□
    Drinks on you.
  • sj4088sj4088 Member Posts: 114 ■■■□□□□□□□
    Drinks on you.

    Indeed! lol
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