![]() It also depends on the number of company shares that exist. We’ve seen strike prices anywhere from a few cents per share all the way up to hundreds of dollars per share. The strike price amount really depends on how mature a company is and how well it’s doing.Įarly on in most companies, you'll see strike prices for under a dollar-even as low as five cents or ten cents.īut as the company grows, that price will grow. Basically, any time there's big news for a company, they’ll likely reevaluate their 409A valuation and thus their strike price going forward. Major events, like the pandemic, can also lead companies to reevaluate their 409A valuation. Most companies also get an updated 409A valuation when they raise a new round of funding. (Already existing stock options keep their old strike price). That will be the strike price for all new stock options until the company gets a new appraisal and the 409A changes. So if a company’s shares get valued at $1 a share, then every new employee receiving an option grant (as well as existing employees that get additional option grants) will have a strike price of $1 a share. ![]() That’s the 409A valuation, and that number becomes the strike price of any newly granted stock options. When you get stock options, their strike price is set to the company’s 409A valuation (also known as fair market value) at that time.Ĭompanies update their 409A valuation pretty regularly.Īt least once a year, a company will get an independent appraisal of the value of their shares for tax purposes. How is the strike price of stock options calculated? It doesn't matter if you exercise right away, one year later, or ten years later-the strike price will always be how much you’re going to pay to exercise each option.Įven if the company’s value goes through the roof, the strike price will remain the same amount that was in your option grant. This amount gets set when you receive your initial stock option grant. With the grant, your company will give you the number of options, their vesting schedule, and the strike price.Įvery time you exercise your stock options, you will pay your company the same exact amount per share (not including taxes). The strike price is how much you’ll pay to purchase one share of your company when you exercise a stock option.
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