In a nutshell: “The corporation’s articles of incorporation, original and as amended, can be difficult to obtain from the state that issued them, and employees or others investing in the company may not realize that what’s hidden in the articles may later prove to be of critical importance.”

Entering a startup without understanding liquidation preferences would be insane, but handing an employee a copy of the cap table and the Articles would be insane too.

The solution, of course, is to build furniture in your garage.

Right, the absolute garbage that is corporate disclosure aids and abets the scam cum business model

You sound like I might be able you convince you to join my furniture cooperative. Shall I send you our ESPP agreement?

I've heard of other schemes, like a forced 10,000:1 reverse-split, with shareholders having fewer shares being paid out in cash. Then the company IPOs with a much higher value, but only the shareholders with 10,000+ shares get a piece.

My impression is that if rank and file employees profit off an IPO or aquisition, it means someone dropped the ball on pushing them out. Until it becomes impossible to recruit, these shenanigans will continue.

It's more that private corporations aren't required disclosure of their articles of incorporation and aren't required to operate in good faith.

Basically means scams are protected via government obfuscation.

Usually the big reverse split is coupled with the issuance of new post-split shares to the insiders. I’ve heard this referred to as a “wash out”.

TLDR:

Your exec team and investors (the board) can monkey around with any non-IPO acquisition to make sure they get paid before you as a regular employee.

1) They can put a "deemed liquidation" clause in the company's legal docs so that sales are treated as liquidations. Therefore the preferred stock gets paid before the common stock, making investors whole.

2) Management will negotiate a retention agreement despite the fact that the common is worth 0 to get themselves paid.