July 30, 2011

How My Stock Got Reverse Split 22,000 to One

A lot of stories are written about companies that do extremely well, or people who have struck it big. Those are fun. But even in the Silicon Valley, there are stories that didn't go quite so smoothly.

Back in 2001, I joined an innovative new company that was going to go head to head with large established firms like EMC, NetApp, Dell and IBM. We had new ideas and a great feature set with big potential customers lined up. I was given 15,000 stock options for my role as a Marketing Manager, which optimistic colleagues used to point to the crazy P&E ratios of the time to expect that if we met plans, could be worth not just millions, but tens of millions, someday.

But for a variety of reasons, both due to our own issues, and global economics, initial growth was way behind expectations. Our losses were high, and we found ourselves needing to go out for another financing round at a much lower valuation by 2003. We raised plenty more money, but those initial shares I had were reverse split 550 to 1. This meant my initial 15,000 shares were now a shade over 27 shares.

By 2005, we went back to the well again, and got more funding. Those 27 shares were reverse split a second time, this time at a ratio of 40 to 1. That left me with less than a single share from my first allocation (15,000/22,000), so even though I'd vested all four years' worth, the finance team rounded my fractional share down to zero.

In my 12+ years in the valley, I've been hired, promoted and laid off. I've raised big rounds of funding and seen them go up in smoke. I've filed for IPO and withdrawn it, and seen companies talk acquisition, but then decline. That's part of why I still fight for startups when I do, and why I try to add a little more depth when I write about companies big and small. I've got the gray hairs and scars from having lived this... and I'm no armchair quarterback.

/via My Google+ Profile.

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