From Cover, issue no. 399, December 22, 2008
Translated by Li Jia
Original article:[Chinese]
When China's online industry was booming, many IT professionals were willing to take on lower salaries in exchange for more stock options in their firms.
They hoped by holding out for a few years, they would become millionaires overnight when their companies went public and share prices soared.
However, many of them had their dreams dashed when the global credit crunch set in and online companies abandoned plans for listing.
Zhang Ping was among them. She had been holding a managerial post at a multimedia company for two years, logging in overtime often to get through the heavy workload.
The motivation that kept her up during those nights had been the thought of 50,000 stock options, which her company promised to offer once it listed around year-end 2010.
She had been looking forward to cash in hundred of thousands of yuan with those options, with which she planned to buy a terraced house and trade her Santana in for a Porsche.
"The options are nothing but a bunch of worthless paper now," Zhang said. She has since joined another web company.
For the past few years, many Chinese IT firms have been using stock options as a bait for head hunting and talent retention. At one point, the staff of Baidu, China's leading search engine, were the envy of the industry: there was a saying that when Baidu went public, even its receptionists would become millionaires.
Usually, Chinese IT firms would introduce motivation schemes under which staff would receive from 5% to 10% of the companies' options, to be handed out in three to four years.
There were high expectation that once these companies went public, the options' value would shoot up 10 or even 20 times their face value.
When Zhang joined the industry in early 2007, her job offer came in two remuneration packages - she could either opt for a high salary with less share options; or a lower salary but more options.
With the success of Baidu and Alibaba, China's leading e-commerce platform, fresh in her mind, she opted for the latter.
Though she would only receive 25% of the options in two years and would lose them if she quit early, she was prepared to wait it out.
She said the possibility of becoming a millionaire overnight was too tempting, and that it could mean "saving herself from 10 years of hard work".
Xu Yi, who joined an e-commerce firm around the same time as Zhang, shared the same aspirations. His employment contract stated that after a year on the job, he would start receiving stock options in batches, with the final hand-out completed in the fourth year.
But as in Zhang's case, reality was much harsher.
After Alibaba listed on the Hong Kong stock exchange in the end of 2007, the capital market cooled off. Stock prices for IT firms sled and their PE ratio began to fall.
Since then, few new media ventures were listed. One of the last to list was China Distance Education Holdings Limited, which had lowered its price from earlier estimations for its initial public offering (IPO).
"The economic crisis has dashed the "listing" dream of many companies, as well as the hope among white-collar staff to cash in on company options," said Xu, adding he had also left his former job.
"Don't bet on options, it's just too tough," he said.
Industry players said the good times were officially over. Bygone were the days when venture capital flooded the sector, with investors now more prudent and selective.
According to Wang Yong from Kela.cn,when his company first raised capital on the open market, his founding team members benefited from a 34-fold jump in the value of their options.
Yet those who were in the wrong place at the wrong time were left only with devaluing options. Xiong Linyan, for instance, had seen her shares plummet by some 40% since her company listed.
