Hi, I have an ESOPs related question. Appreciate any inputs.
Consider a Series B startup providing an employee with 5000 shares. After 2 years, 2000 shares are vested and exercised by the employee. The stocks were never liquidated because the company didn't conduct buyback nor went IPO.
Now, assume the company lays off that employee after 2 years,
1- Yes
2- It will be decided by the company
3- Usually No, However it will be decided by the company
This is correct.
Please note - you have asked the question assuming that you have exercised these 2000 shares - this usually doesn't happen. People usually do not exercise vested shares, because you will need to pay tax on exercise which comes up to a hefty sum. So exercise and liquidation is usually done together. Many companies allow employees to exercise shares even after separation (but check your ESOP policy to be sure).
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