What Happens to Employee Esops After a Valuation Markdown

Esops give employees the right to buy company shares, usually at a fixed price.

Employees first receive the options, then earn them over time through vesting.

They can later buy the shares during the exercise period.

If the company is acquired, employees who already bought shares may receive shares in the acquiring company.

Employees with vested options that they have not exercised may receive new options, or their options may be cancelled.

Unvested options may also be replaced or cancelled, depending on the deal and the company’s rules.

If the company’s value falls below the price an employee paid, the investment may be worth less than it cost.

Employees may also owe tax when exercising options and when selling the shares for a profit.