Private Companies Extended Option Programs


As technology companies find themselves pushing back IPO timelines and staying private for longer periods of time, they continue to aggressively compete for talent, often against public companies like Google and Facebook.  Given the new dynamic in the marketplace, enhancing the effectiveness and competitiveness of equity programs is one area that can help private companies attract and retain talent.  

One approach that captured headlines recently was Pinterest's announcement to offer employees an extended period of time to exercise stock options after employment ends. In a typical private company stock option, employees are given 3 months after employment ends to exercise vested stock options.  Under the new extended option approach, employees will be given a longer period of time (e.g., 7 years) after employment ends to exercise vested stock options.

Why do this? What are the downsides? What should be taken into consideration?

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