Postmates’ difficult but successful investment raise of $141 million has given the delivery startup new life. But its investors felt they needed to forfeit some perks in the progress. And this is all to make sure that early employees motivated to stay with the company.
The fix that investors came up with was to convert the shares they previously bought from preferred shares to common shares — the type of stock or stock option that employees typically hold. Such a move isn’t extremely common, but there is some precedent for it. Gilt Groupe investors, for example, did the same when the company raised its last round of funding. But its $250 million sale was still bad for most employees.
Postmates stock – trends and opinions!
To understand why such a decision is still noteworthy, you need to understand preferred stock. Venture capital investors often receive preferred stock when investing in startups. One of the advantages of preferred shares is what is called a liquidation preference. That which gives these preferred stockholders the right to recoup all of the money they invested before common stockholders make a dime in the event of a sale of the company.
Postmates is in dozens of cities and has delivery partnerships with big-name chains like Starbucks and Chipotle. But it is still unprofitable and far from a sure thing, so outcome like the one outlined above is plausible. And that potential result might make it harder to retain talented employees looking for upside from the Postmates stock or stock options they hold.
The sense is many Postmates investors believe the company is going to either have a fantastic outcome. Also or some version of a disappointing one. In the latter case, the earnings from a sale of preferred shares really wouldn’t move the needle for VC firms anyway.
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