What happens to the unvested stock when a co-founder leaves the company?

Even though it may not be appropriate, it has become pretty common practice to use vesting and repurchase interchangeably. When there is unvested stock, and the company can and does repurchase the stock of the departing founder that is “unvested” it is removed from the ownership calculation. Here is how to think about about unvested stock when a co-founder leaves the company

Let’s assume there are 100 issued in the company. The number of “issued” shares is the denominator by which you calculate ownership. Therefore, the ownership looks like the following:

  • CF1 – 40 Shares = 40%
  • CF2 – 40 Shares = 40%
  • VC – 20 Shares = 20%

CF2 has decided to leave and the company WILL EXERCISE its right of repurchase on CF2′s stock, meaning it can repurchase the stock which has not vested (in this case 20 shares). So 20 shares are repurchased and are no longer “issued.” Therefore the new stock ownership looks like the following:

  • CF1 – 40 Shares = 50%
  • CF2 – 20 Shares = 25%
  • VC – 20 Shares = 25%

About Author Matt Faustman


Matt is the co-founder and CEO at UpCounsel. Matt believes in the power of online platforms to change antiquated ways of life and founded UpCounsel to make legal services efficiently accessible. He is responsible for our overall vision and growth of the UpCounsel platform. Before founding UpCounsel, Matt practiced as a startup and business attorney.

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