Ask HN: Should I sue my ex-employer?

8 points by throwaway28692 1 year ago | 6 comments

Like many startup employees these days, I'm stuck waiting for my ex-employer to IPO, which in this era could be pretty much forever. Employee friendly companies include ex-employees in tender offers but mine does not.

What I'm wondering is, has the legality of founders taking money off the table while not extending the same opportunity to all shareholders ever been tested? It seems like a clear case of making decisions that personally benefit controlling shareholders at the expense of minority shareholders.

I don't really want to get involved in legal action but I think the current state of affairs is really toxic and industry leaders need to do something about it. In a world where companies can stay private indefinitely, employees should not need to rely on the charity of their (possibly ex) employer to get access to liquidity. Posting this on HN because if anyone is well positioned to create the norms here, it's YC leadership.

bradac56 1 year ago |

It's not a "current state of affairs" the industry has been like this for the last 30 years.

There is a difference between a "private" company and a "startup" the problem with startups is they mainly hire younger workers that are willing to take two trigger private stock options that will almost never trigger. Only the equity investors get single trigger options for when the company gets bought by a big player based only on the valuation (that's the end goal of startups 80% of the time).

While a truly private company (think Harbor Freight, etc) will be focused on building the business not the valuation and if they do offer private stock as a cash build it's very limited but single triggered. It's almost always bought back in a buy back so no loss of money typically.

I tend to work in the large corporation side which is a different beast altogether. I did just get bit by a tiny little startup but I knew that was coming from the start. It was an easy 2 year pay-day.

bruce511 1 year ago |

Since whether you have a case or not depends entirely on the specifics of your options (or shares or whatever), it's impossible to give you legal advice beyond "get a lawyer".

Presumably when you were an employee you understood that these equity-pay structures were basically a lottery. And no, it would seem you didn't hit it. Like any lottery there's an element of unfairness built in.

Personally I wouldn't bother. I think if you do the math in time, money for lawyer, likelihood of success, you'll find that walking away is your simplest, cheapest, outcome.

You made your first mistake working for valueless equity. Learn from that - write it off as education. And hey, who knows, maybe they will IPO sometime...

deanmoriarty 1 year ago |

It’s truly the biggest scam in the industry.

Staying years at an early startup in exchange for paper money (and having to pay AMT + exercise costs) is one of the biggest regrets in my career, I truly don’t know what I was thinking.

I still have a bunch of this paper junk and I wish they’d at least go to $0 so that I could claim a capital loss on my exercised cost basis, but they are stuck in zombie land.

toomuchtodo 1 year ago |

Can’t hurt to speak to an attorney. Find one with startup and securities experience.

bradac56 1 year ago | |

Speaking to that type of attorney is going to cost at least a grand upfront.

toomuchtodo 1 year ago | | |

For an hour of time to evaluate a case? I’ve never spent more than $300, but I don’t doubt some may charge that. Don’t spend much more than that for this exploratory phase is my opinion.