Square Inc., which started trading on Thursday after an initial public offering, is worth less than the valuation it got as a private company — and some employees are hurting.

While early investors and executives are reaping large gains, some staff of the mobile-payments company are finding their stock options below water, or worth less than when they were issued. According to regulatory filings, about 21 million options have been awarded at a value above the $13.07 closing price of Square’s stock today.

The company’s IPO serves as a reality check for employees of other multibillion-dollar startups, who may not end up with as much money as they expected. The benefits are further complicated as late-stage startups take deals that guarantee higher returns for investors, making employees last in line to get paid.

For example, Square, Box Inc. and other companies have accepted what are called "ratchets" as part of late-stage financing rounds, which give investors protection in case the company’s stock doesn’t perform as well. With Square, investors were guaranteed a 20 percent premium on their investment, which would be worth $18.56 a share, meaning Square had to issue more shares to those investors, further devaluing the stock owned by employees.

"When the shakeout happens and the valuations come back down to earth, you’re going to see an acceleration in the movement of startup employees to bigger, more established companies because they realize they can’t handle the risk," said Chris Zaharis, who has worked at startups for about 20 years and worked as an adviser to many workers trying to better understand their equity rights.

For now, any disappointment is just on paper. Employees aren’t legally allowed to sell any shares until 180 days after the company’s IPO filing, so the reckoning will happen then, depending on whether Square’s share price climbs high enough to put them back in the money. The stock got off to a good start, climbing 45 percent in its first day.

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