Repurchase Rights
Definition
The company's right to buy back your shares (vested or unvested) under specific conditions, usually when you leave the company. For unvested shares (after early exercise), the repurchase price is typically what you paid. For vested shares, some agreements allow the company to repurchase at FMV, potentially forcing you to sell shares you wanted to keep.
Real-World Example
You early-exercised 50,000 shares at $0.10/share. After 2 years (50% vested), you leave. The company repurchases 25,000 unvested shares at $0.10/share, returning your $2,500. Your 25,000 vested shares are yours to keep — unless the agreement includes a vested share repurchase clause.
Common Mistake
Not checking whether the company has repurchase rights on vested shares. While uncommon at mature startups, some early-stage companies include this provision. It means even your vested, exercised shares could be forcibly bought back if you leave.
Why It Matters
Repurchase rights determine whether leaving the company means losing your equity. Understanding these terms before you accept an offer prevents unpleasant surprises when you eventually move on.
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