Things to consider before exercising my options??

deltastrike

deltastrike

Hey all,

I am in the process of leaving my privately held company for another job and have a few hundred options that I can either exercise or leave behind. What things (fundamentally, financially) should I consider when analyzing whether or not I should exercise them? Any suggestions would be great...
 
Quote from deltastrike:

Hey all,

I am in the process of leaving my privately held company for another job and have a few hundred options that I can either exercise or leave behind. What things (fundamentally, financially) should I consider when analyzing whether or not I should exercise them? Any suggestions would be great...
More...

Before I could give any advice,

You say this is a private company, I am assuming you will get stock in the private company when you exercise your options. Is this stock tradable at all? Will the company buy it from you at a certain price? Are you committed to holding the stock for a certain length of time? How is the company valuing the stock now?
 
Quote from FSU:

Before I could give any advice,

You say this is a private company, I am assuming you will get stock in the private company when you exercise your options. Is this stock tradable at all? Will the company buy it from you at a certain price? Are you committed to holding the stock for a certain length of time? How is the company valuing the stock now?
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Yes, I will be receiving stock in the private company. This stock is "tradable" in the sense that if I find a buyer in the secondary/private market and the transaction is approved by the GC. The company will not buy it back at this time due to being very conservative with cash at the moment (impending ipo???), and there is no holding commitment. Right now the stock is valued at ~+30% from the strike price.
 
Quote from ForexForex:

I would take the money. A Bird in the Hand is Better than Two in the Bush.
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"take the money" as in don't exercise? Or exercise and sell immediately?
 
You mean you have the choice of:

1) Exercising them (and getting shares of stock)

or

2) Leaving them behind (and getting nothing)

???

Sounds like a no brainer.


I'm not sure how hard it would be to sell private shares though. "Finding a buyer" sounds hard.

edit - whoa, when I opened this thread there were 0 replies. I typed out mine and all these other replies showed up. Weird.
 
How much will it cost you to exercise?

ETA: Not sure about a private company, but exercising a publicly traded stock is a taxable event. You are taxed on the difference between you cost basis and the market value when you exercise.
 
Quote from Eliot Hosewater:

How much will it cost you to exercise?

ETA: Not sure about a private company, but exercising a publicly traded stock is a taxable event. You are taxed on the difference between you cost basis and the market value when you exercise.
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I'm aware of the tax implications. I'm really just trying to figure out if there are any other factors, such as the corporate finance side of things, I should ask about before forking over $5k.
 
Quote from deltastrike:

Yes, I will be receiving stock in the private company. This stock is "tradable" in the sense that if I find a buyer in the secondary/private market and the transaction is approved by the GC. The company will not buy it back at this time due to being very conservative with cash at the moment (impending ipo???), and there is no holding commitment. Right now the stock is valued at ~+30% from the strike price.
More...

I think you are the best one to decide whether to exercise or leave these options. You know the company better than anyone here. Do you think it is a good long term investment. How important is the money needed to buy the stock? If you could easily sell the stock, you would of course do it. You may want to try to arrange a sale in advance of your exercise. There are companies that deal in trading privately held stock.
 
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