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I have received two job offers both containing stock purchase options. Unfortunately, I have no clue what they mean and how to compare one with another.

Company A: It will be recommended at the first meeting of the Company's Board of Directors following commencement of employment, that The Company grant to you an option to purchase 1,000 shares of The Company's common stock at a price per share equal to the fair market value on the date prior to such grant. The vesting schedule for these options is subject to a 4-year vesting schedule, with 25% and 1/4% of the options becoming vested on the anniversary of each year of the grant date.

Company B: Subject to the Company’s Board of Directors (the “Board”) approval after you commence employment, you will receive an option grant to purchase 25,000 shares of the Company’s common stock, at a purchase price equal to the fair market value of the Company’s Common Stock on the date of grant (such fair market value to be determined by the Board). The option will be subject to the terms and conditions applicable to options granted under the Company’s 2015 Equity Incentive Plan (the “Plan”), as described in the Plan and the applicable option agreement that you will be required to sign. All shares subject to such option will vest over five years, commencing on your first day of employment with the Company (the “Vesting Commencement Date”). Twenty percent (20%) of the shares subject to such option shall vest on the one year anniversary of the Vesting Commencement Date and the remaining options shall vest in equal monthly installments over the four years thereafter.

Thanks in advance for your help.

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The legalese on those two you posted look pretty standard. The big change I saw is that on the second, the vesting after the first year is monthly, whereas the first one is yearly through the whole 4 years. Everything else being equal, the second option would be preferable, because you have a bit more flexibility if you want to sell them at some point.

However, overall, you can't really compare these two without more information about the companies. What's the size of the company? How many shares are outstanding? Are these pre-IPO companies? Pre-VC rounds? 1000 shares of Amazon would be much, much more valuable than 1000 shares of Barnes and Noble. Also, note that both of these are giving you the option to buy shares, at today's fair market price. They're not a straight-up bonus, like the more common RSUs. So, in this case, in theory, if the price of the shares go up to 2x what it is today, then you'll be able to make money on them. If it goes down though, it might not even be worth it to exercise the options.

  • "fair market value" these days doesn't make much sense unless the company grows big way. Plus as these are closely held, the "fair market value" is subject ... the price can be bloated. – Dheer Jun 22 '17 at 2:55
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    Also, first one is over 4 years; second is over 5. – Kevin Jun 22 '17 at 4:50
  • So, 25000 vs 1000 shares does not mean anything immediately, right? – Omar Shehab Jun 22 '17 at 5:50
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    @OmarShehab No, not in itself. If the first company's shares are currently $2.50 per share, and the second are 10c per share, they would be worth the same now. But even if they don't line up like this, all that changes is the initial value of your options. What determines if (and how much) you "win" is what happens to the share price in the future. – TripeHound Jun 22 '17 at 8:17

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