Stock Options Example: Kosei (Pinterest Acquisition)

This final segment offers a real-world walkthrough of a startup stock option offer and breaks down the critical information employees need to assess the true value of such equity. It highlights how confusing option grants can be without proper context and the financial implications of exercising options.

• Real Offer Letter Example: The speaker received an offer of 62,000 options at a $0.14 strike price, totaling $8,750 to exercise. However, the true value of this offer depends entirely on factors not included in the letter, like company valuation and total shares outstanding.
• Vesting and Exercising Mechanics: Vesting followed the standard schedule—1-year cliff with monthly vesting afterward. Post-termination, many startups only give a 90-day window to exercise, which can be financially burdensome.
• Liquidity and Risk Considerations: Employees may lose out if they can't afford to exercise before leaving a startup. As a response, some companies began extending the exercise window up to 10 years, reducing financial pressure on departing employees.
• Tax Strategy Tip: Exercising early (if financially feasible) starts the clock on long-term capital gains, which can save 10–12% in taxes versus short-term treatment if exercised and sold after a liquidity event.
• Most Common Mistake: Employees often overvalue large share numbers without understanding what fraction of the company those shares represent. To assess an offer, it’s essential to ask:

  • What percentage of the company do these shares represent?

  • What is the current fair market value versus the strike price?

Without those answers, it's impossible to accurately evaluate the worth of a stock option grant.