Unvested stock when a co-founder leaves the company

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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%

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