That's pretty shitty behavior. I guess they figure "that's just business" or "we did what we had to do." But I'm a little confused as to how it all plays out legally.
Suppose, for example, an employee negotiates a package with a company, and part of that negotiation is for a stock package that the company estimates is worth X. Now, it seems to me that the estimate has to be a good-faith estimate in order for the negotiation to be valid. If the employee signs an NDA or a non-compete, it would seem like finding out that the company lied should invalidate the contracts signed as a result of that negotiation (the NDA or NC).
It's one thing if something truly unforeseeable arises which destroys the value of the stock. It's something else if it's done in bad faith.
But, I'm not a lawyer, and there's probably a reason that I am not one.
Suppose, for example, an employee negotiates a package with a company, and part of that negotiation is for a stock package that the company estimates is worth X. Now, it seems to me that the estimate has to be a good-faith estimate in order for the negotiation to be valid.
That's where you have gone wrong. No private company (unless they are insane) will ever state a future value for a stock package - they will merely offer units of stock (and maybe state it in terms of a percentage of the company). The employee might try and calculate that value, and the company might state things like "based on our last funding valuation these shares are valued at $X", but that is very different to claiming they will be worth anything at any date in the future.
In startup companies, share options are usually granted using a vesting arrangement, which assigns a low value to the share options but doesn't allow
the employee to buy them until some point in the future (where presumably the share will be worth more than the option). If that point arrives, and the shares are worth less than the options then bad luck! (This situation isn't uncommon, and is known as "being underwater". It occurs in public companies, too. For example, Google revalued the options of its employees in 2008 after the Google share price fell substantially and a majority of its employees were underwater)
The situation is different for publicly listed companies of course, because there the stock actually is worth something. In that case the company really can give a value to the shares at that point in time.
Actually, I was speaking of present value. I understand the risk that the value might change, I was just speaking of the company misrepresenting the value. Yes, there is a lot of handwaving and guessing. That's an expected part of the game. It's deliberate deception I was concerned with- not disclosing what they know.
Suppose, for example, an employee negotiates a package with a company, and part of that negotiation is for a stock package that the company estimates is worth X. Now, it seems to me that the estimate has to be a good-faith estimate in order for the negotiation to be valid. If the employee signs an NDA or a non-compete, it would seem like finding out that the company lied should invalidate the contracts signed as a result of that negotiation (the NDA or NC).
It's one thing if something truly unforeseeable arises which destroys the value of the stock. It's something else if it's done in bad faith.
But, I'm not a lawyer, and there's probably a reason that I am not one.