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What can I do to protect employee options in a down round?
Issue new options at a price that reflects the new valuation. Repricing options or surrendering and regranting at a lower price will result in adverse accounting treatment. Instead, companies doing down rounds typically accept the additional dilution and issue new options to employees whose old options are out of the money. The new options can be priced at a discount to the down round if the options are for common stock and the investors buy preferred stock.
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