Disclaimer: Company-specific facts here come from public reporting. Disputed allegations are one party’s claims; the companies involved have publicly denied them, and the final word rests with regulators and courts. This is industry commentary and general guidance — not legal or investment advice.
“I have equity” and “I can cash it out” are two completely different things. Before an IPO, your options usually sit inside a holding vehicle controlled by the founder — pricing, dilution, and paperwork are all out of your hands. And an IPO only changes the price of those shares, not whether you can actually get them. This guide uses three publicly reported disputes from 2026 to explain the mechanism, plus four non-negotiables for signing day and a self-check list.
In July 2026, while Chinese robotics maker Dobot (2432.HK) was pursuing an A-share listing, its former EVP/COO Song Tao went public. His situation boils down to three sentences: in 2017 the company promised him 3.8% of total equity in a signed agreement; by 2026 the corporate registry showed only 0.64% attributable to him; and even that 0.64% the company sued to reclaim — for RMB 1.39 million, less than 3% of its market value. Every number in those three sentences — the 3.8% agreement, the 0.64% registration, the RMB 1.39M demand — comes from the agreement itself, corporate registry records and court filings, not from either side’s say-so; who the shares should belong to is Song Tao’s claim, which Dobot has publicly denied as “untrue and seriously misleading” — the final word rests with arbitration and regulators (the listing cleared review on July 22). Two more cases surfaced the same season: a former Xiaohongshu employee whose unlawful-termination and equity-loss claims were upheld by courts in Guangzhou with binding effect; and Zhang Fan, who describes herself as 360’s first board secretary and says that seven years after leaving — and five years after the holding vehicle sold out — her incentive equity remains unpaid (360 responded that the incentive rules were designed under her own leadership and that it supports resolving the dispute through legal channels).
These are stories about executives, but the core lesson lands on everyone holding options:
“I have equity” and “I can cash it out” are two completely different things.
This guide explains the mechanism, the warning signs, and how to protect yourself. It won’t teach you to hate founders — it teaches you to tell them apart: spot the good companies, dodge the bad signals.
Before an IPO, your options usually aren’t company stock registered in your name. They sit inside an employee holding vehicle (in China, typically a limited partnership; in the US, often an entity or trust). You are a Limited Partner (LP); the General Partner (GP) — the one who actually decides things — is often the boss or an entity he controls.
The structure is perfectly legal, but it creates three built-in asymmetries:
| Asymmetry | What it means | Consequence |
|---|---|---|
| Pricing | Private shares have no market price; the valuation report is commissioned and paid for by the company | The buyback “fair price” is driven by the company’s side |
| Dilution | Capital increases, share reshuffles, and transfers at the vehicle level are decided by the GP | Your indirect stake can be diluted without your knowledge |
| Information | What you sign, which version is binding, whether you get a copy — the company holds the initiative | Many people only truly read what they signed at exit |
Bottom line: before the IPO, what your equity is worth and whether you can take it depends less on the number in the contract than on the other side’s willingness — and on the evidence you kept.
“My contract says it vests over 3–4 years, so once it vests, it’s mine.” — that’s the most dangerous illusion. To make it evaporate, the company doesn’t even need to breach the contract; three soft plays are enough:
And there’s a fourth to watch for above all — signing something against your own interest without ever really noticing: from a stack of documents you’re handed only the last signature page — “board resolution, just a formality” — while a re-lock or “voluntary waiver” clause hides inside. What disarms you is never some con-man’s trick. It’s embarrassment.
The rule: if a document tied to your net worth is one the other side won’t even give you a copy of, it is probably not “just a formality.”
Don’t use the pre-funding founder to predict the post-funding one. The only reliable signal is his track record when real money is on the table.
The soul of an equity program isn’t in the contract text — it’s in the default.
| Dimension | Healthy governance (common at top SV firms) | Dysfunctional companies |
|---|---|---|
| Vested portion | It’s your property; walking away with it is the default | “Forfeit on pre-IPO departure” treated as a “principle” |
| Keep it after leaving? | Yes — vested is vested | Often pressured to sign it back |
| Must you wait for IPO to cash out? | No — periodic tender offers provide early liquidity | The “unlisted = worthless paper” line |
| When a dispute surfaces | Fast self-correction under peer/press pressure | Make the employee run the full multi-year gauntlet |
| Pricing | Secondary market or latest round | Company-commissioned valuation |
A few verifiable public facts (to illustrate “defaults,” not to praise or attack any country):
Save this. Run through it at hiring, at every signature, and before you leave:
| Term | One-line explanation |
|---|---|
| Option | A right to buy company shares later at a set price; not actual equity at signing. |
| RSU / Restricted Stock | Equity that becomes yours once conditions (e.g., service period) are met. |
| Vesting | The process by which equity gradually “becomes yours” over time or on conditions. |
| Cliff | Usually you get nothing until 1 year in, then the first batch (e.g., 1/4). |
| Holding vehicle / ESOP platform | The entity through which employees hold equity indirectly (often an LP). |
| GP (General Partner) | The controlling/deciding party of the holding vehicle — usually the boss. |
| LP (Limited Partner) | The employee who holds an interest but no control. |
| Tender Offer | A company-organized buyback of shares that lets employees cash out pre-IPO. |
| Exercise Window | The deadline to exercise after leaving; miss it and options expire (often 90 days; good firms extend to 7–10 years). |
| Buyback / Repurchase | The company or controller buying your interest back at an agreed price. |
| VIE / Red-chip structure | Onshore entities controlled by an offshore parent via contracts, used for overseas listings. |
Not necessarily — it depends on the contract and the company’s willingness. A common practice in China is “forfeit or buy back on departure,” sometimes even for vested units. Courts in Guangzhou have affirmed (in the Xiaohongshu case) that options are tied to the employment relationship and are an extension of labor compensation — not a perk the company can freely reclaim. Read the departure clauses before signing.
It’s the entity through which employees hold shares indirectly — usually a limited partnership. You are a Limited Partner (LP); the General Partner (GP) who actually decides is often the boss or an entity he controls. In one line: the shares are yours, but the steering wheel is his. Pricing, dilution and paperwork are all initiated on the company’s side.
No — but liquidity depends on the company. ByteDance periodically buys back veteran employees’ shares while private; SpaceX, Stripe and OpenAI run tender offers letting employees cash out at the latest valuation. “Unlisted means worthless” is a talking point, not a fact — healthy companies actively provide liquidity.
Not necessarily. As long as your name sits in the holding vehicle rather than your own brokerage account, none of the three asymmetries (pricing, dilution, information) is resolved. An IPO changes the price of the shares — not whether you can get them.
Most people assume dilution only happens at the company level (a new round comes in, everyone shrinks proportionally — fair). But once equity sits in a holding vehicle, there’s also vehicle-level reallocation and transfers — the cake doesn’t grow, yet a slice can be moved off your plate. Ask before signing: how are vehicle-level adjustments decided, and is your consent required?
Four: ① don’t sign what you haven’t fully read — take the document away and study it; ② if handed only a signature page, insist on the full document; ③ dates must be real — beware of backdating; ④ keep a copy of everything you sign. A “contract” they won’t give you a copy of is probably not “just a formality.”
The core difference is the default. The Valley standard is 4-year vesting with a 1-year cliff, and vested equity is your property — taking it with you when you leave is the default. OpenAI co-founder Ilya Sutskever led the vote to remove the CEO, left in 2024, and kept his shares (disclosed in 2026 as worth about $7B). The Valley has its own traps (the 90-day exercise window), but the industry self-corrects: OpenAI’s 2024 “vested-equity clawback” clause was deleted within days of exposure, with a public apology.
Preserve evidence: keep contract copies and get important communications into email and writing; check the holding vehicle’s registry filings for changes you weren’t told about; consult a lawyer who has actually handled equity-incentive disputes (not a general practitioner) before negotiating or cutting losses. The people who could speak up all had paper trails.
Today it’s someone else; tomorrow it could be you. Rule defaults never fall from the sky — they get pushed into place by one round of watching, one round of insisting, after another. The minute you stop for Song Tao today, you are also stopping for ourselves.
Questions about options and equity, or need a referral to a lawyer who has actually handled equity-incentive cases? Email:
huanghe2014@gmail.com
No promise it will be fast — but you will get a reply.
I’m not a lawyer. What I can do is simply share experience and help you avoid detours; for your specific case, please consult a licensed attorney. If you are in an active dispute, please do not email case evidence — check with your own lawyer first on what to disclose and when.