A grant percentage is not spendable value.
Option intrinsic value is the positive difference between a common share’s value and its exercise price, multiplied by vested options. Exercise cost must be funded even when the gross share value appears substantial.
A preferred-round share price can overstate common-share value because investors may have senior rights. This model expects a common-share value after those rights and does not predict when liquidity will occur.
The formula, made clear.
- Common-share value
- Per-share value available to common after senior claims at the assumed liquidity event.
- Intrinsic value
- Exercise value only; excludes time value, taxes and transaction costs.
Put the numbers in context.
Half of 10,000 options are vested. At $10.00 common-share value and $2.00 strike, 5,000 options have $40,000.00 intrinsic value, requiring $10,000.00 to exercise.
| Input | Example value |
|---|---|
| Options granted | 10,000 options |
| Vested portion | 50% |
| Common-share value at liquidity | $10.00 |
| Exercise price per option | $2.00 |
| Vested option intrinsic value | $40,000.00 |
What this calculation assumes
One option grant with one strike and an entered vested proportion. No tax, expiry, early exercise, vesting acceleration, exercise restrictions or future dilution. Out-of-the-money options have zero intrinsic value.
What to consider next.
Model the common-equity proceeds after financing preferences and confirm the grant’s exercise and tax terms separately.
How we approach financial models →