Marin Software might be an incredible company that's currently undervalued and therefore an arguably attractive investment. Anybody who believes that can go out and purchase Marin Software stock and profit if its value increases.
If the Perfect Audience deal was all cash, and each employee netted $750,000, how many employees do you think would go out and purchase $750,000 in Marin Software stock?
When employees fail to cash out as soon as they're able, they are effectively investing their money in their new employer. The challenge for rank-and-file employees who hold stock in a company with a languishing stock price is that they often start to think about hypothetical gains. "My stock is worth $600,000 today, but once the market realizes how great the company is, the stock price could double and I'll be a millionaire."
This thinking is especially appealing when you haven't netted millions from an acquisition because six or low seven figures really isn't as life-changing as many believe it will be. Heck, in the most desirable parts of the Bay Area, $750,000 won't even buy you a "starter home."
Your point here seems to be that cash is preferable to stock as an acquisition payment, which is trivially true but not a very interesting point. Yes, an all cash deal would have been preferable to what we're getting. So would a 5x higher deal price.
I'm sure lots of startup employees make a hash of things when they're first presented with an uncertain windfall in the form of restricted stock. It's a risk we're all aware of and need to manage for ourselves, but that doesn't mean we've somehow been dealt a raw deal.
No, my point was that it's hard to realize a meaningful windfall as a startup employee. It wasn't that you were dealt a raw deal, or that stock as a form of payment is inherently bad.
My response to you simply observed that when employees fail to convert their stock to cash as soon as possible, they are effectively investing the proceeds of a capital gain in the stock of their new employer.
You mentioned that you had a deep background in markets and trading, so I'm sure you're well aware that lots of very intelligent people make irrational investment decisions. With that in mind, you might want to consider that the number of people who opted not to immediately cash out stock received in an acquisition (betting that it would be worth more in the near future) far exceeds the number of people who took all their cash from an all-cash acquisition and purchased stock in their acquirer in the open market. This is a result of perception, not logic.
If the Perfect Audience deal was all cash, and each employee netted $750,000, how many employees do you think would go out and purchase $750,000 in Marin Software stock?
When employees fail to cash out as soon as they're able, they are effectively investing their money in their new employer. The challenge for rank-and-file employees who hold stock in a company with a languishing stock price is that they often start to think about hypothetical gains. "My stock is worth $600,000 today, but once the market realizes how great the company is, the stock price could double and I'll be a millionaire."
This thinking is especially appealing when you haven't netted millions from an acquisition because six or low seven figures really isn't as life-changing as many believe it will be. Heck, in the most desirable parts of the Bay Area, $750,000 won't even buy you a "starter home."