Re: stock options

Subject: Re: stock options
From: Andrew Plato <intrepid_es -at- yahoo -dot- com>
To: "TECHWR-L" <techwr-l -at- lists -dot- raycomm -dot- com>
Date: Sat, 23 Mar 2002 11:31:27 -0800 (PST)

"Zack Brown" <> wrote

> So, when starting at a company, they generally will offer stock options
> for salaried employees.

No. Not every company offers stock options. In fact, most do not offer them
these days. In the frenzy stock options became a common way to get
people to work for less. That has now, subsided.

> Since the value of those options are based on
> their percentage of the total pool,

No. The value of those options is based on the value of the stock. If the firm
has not gone public, then the options are technically worthless.

Before a firm goes public investment bankers will value the firm at $x.xx per
share. This will be the price they will sell the stock to pre-ipo institutional
investors. When the stock actually IPOs, it generally sells slightly higer on
the common market than the valuation price (thus allowing the institutional
investors the chance to immediately flip their holdings and make a profit).

If you get into a stock as an employee before IPO, you are not allowed to sell
the stock for 1 year after IPO. This is an SEC regulation to prevent executives
and employees from dropping stocks on the market, jacking them way up, selling
them off, and then trashing the company. (Incidentally, institutional investors
are not held to this rule.)

If your firm is already publically traded, then the value is worth whatever the
stock is priced at. However, since companies usually make you vest the options
over a year or more, the options are again technically worthless until they

Moreover, remember you are getting OPTIONS not actual stock. You are getting
the option to buy the stock at a set price. If those options vest over a year
or more, the actual stock price may go down in that time, making your options
totally worthless. For example, say a firm offers you 1000 shares at $5.00 a
share and they vest in one year. In a year, when you actually can exercise
those options the stock has dropped to $1.00 per share. You would have to pay
your employer $4.00 per share (or $4000) just to get your shares. The stock
would have to go back up to $5.00 per share before you could even break even.

> what kind of percentages do tech
> writers, senior tech writers, and tech writers who do source level API
> documentation, receive typically?

None. Few firms give options to technical writers. Options are intended for
executive and management positions. In the days, many firms used
options to compensate more employees. But that has changed. The problem with
offering stock to every employee is that it dilutes the stock you can sell to
institutional investors. It also has a bit of a stigma now because of all the craziness.

If firms do give out options to tech writers, it is usually a small
disbursement of a few hundred shares.

Andrew Plato

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