The word "preferred" in "preferred stock" indicates that owners of the preferred stock are entitled to get back the full amount of principal invested plus cumulative dividends (together, they are often called the "liquidation preference") before the owners of common stock can see a dime. People who own options to buy common stock are even further behind on the line: They won't see a dime unless there are proceeds allocated to common shareholders and the proceeds per share exceed the exercise price of the options.

That's how the capital structure of VC-backed companies work, by design.

Can any employees confirm if they're getting shut out of the sale? Is this another startup where the employees' shares are lit on fire?

"Another source told TechCrunch that equity holders “got zero’d” so “founders, employees and VCs” will get “nothing” from the sale. The identity of the source, who asked to remain anonymous, has been verified by TechCrunch."