I don't mean to sound too dismissive, but this article is bunkum. SO I guess by the author's logic, Michael Bloomberg's net worth is zero because Bloomberg LP never went public? The private market is illiquid, but fundamentals will always trump liquidity. If you own equity, that equity - assuming there is no dilution or deterioration in the fundamentals of the underlying business - is wealth. Employee stock options are a different matter, but deep in the money options are essentially as good as partial ownership. it may be harder to assess valuation in a private market, but it's done nonetheless.
Mr. Bloomberg's privately held equity undoubtedly makes distributions to its shareholders. Stock that does not pay dividends and is unlikely ever to do so is not wealth; it's just a piece of paper. And if you cannot legally sell it to someone else, it's effectively worthless as there is no way to convert it into something of value. The exception is if you have a majority of the voting rights, but that's not what this article is about.
There are many liquidity events that are not in the set of 'IPO' events. But the issue remains that liquidity is a core element of asset value. Many later stage financing events can be structured to provide limited liquidity to founders and early investors; the issue is that this may not help all employees equally. The IPO is useful in this case.
Bloomberg is an owner. While an employee that owns stock is technically an owner, it's not a significant distinction because they are in such a minority that they have no control over the stock, and are therefore at the whim of the majority owners. It doesn't mean the options are worthless, but they have to be discounted.
I owned stock in a company that will, very likely, never go public or get acquired. It doesn't need to. Because of the shareholder agreements, I could only really sell back to the company. Sometimes they were amenable to buying, other times they weren't. Essentially, I was playing in a monopoly market, except the monopoly was on the buyers side. Fortunately for me, the majority owners were much more generous than they needed to be. Without that, I wouldn't have been able to make anything from the stock.
You're missing the point. A typical options agreement today is not able to be exercised after you quit, even if you're vested. You might have 30 days. IPO is likely a decade away or more, if there is one at all. Where is the liquidity going to come from in an industry that doesn't tend to make profits until well down the road?
There are numerous tax pitfalls along the way were you can get absolutely ruined if you do it wrong. Exercising options can very easily become a non-trivial investment in actual cash.
None of these details are particularly predictable when you start out.
Ownership is ownership, but details matter. There is a long way between signing an options agreement and true ownership, liquid or otherwise. The longer that path, the less certain the payoff, and the less valuable the options.
