Ask HN: Is it possible to exercise options without providing the cash yourself?

#1

Post by notdan » Fri, Feb 03, 2023, 3:05 AM UTC

Am moving on to a new role. Have 10,000 vested options at $2 strike price which is the same as the last FMV. Company estimates current value at $10. Distant future exit is likely in the lower half of 1-5x current value.

I don’t really want to take the risk on buying these myself nor do I really have the cash to invest if I wanted to. Didn’t know if there was any other option to let someone else front the cash take the risk even if it meant giving up a large chuck of the possible reward.

Re: Ask HN: Is it possible to exercise options without providing the cash yourself?

#2

Post by donsupreme » Fri, Feb 03, 2023, 3:25 AM UTC

I am not an expert at all in stock options.

But how can the company estimate the current value at $10 when their FMV is $2?

Re: Ask HN: Is it possible to exercise options without providing the cash yourself?

#3

Post by vivegi » Fri, Feb 03, 2023, 9:21 AM UTC

donsupreme wrote: post #2

I am not an expert at all in stock options. But how can the company estimate the current value at $10 when their FMV is $2?

I think the OP means the strike price of $2 was the FMV when the options were issued. The current value is the company's estimate of FMV right now.

Estimate is used since the company hasn't IPOd yet. So, valuation is private.

Re: Ask HN: Is it possible to exercise options without providing the cash yourself?

#4

Post by ac2u » Fri, Feb 03, 2023, 1:09 PM UTC

The below is not financial advice or recommendations, do your own research.

Because I wouldn't want to link directly to a provider, it's best you google "borrow to exercise options"

There are a lot of articles there discussing the pros and cons, including pointing to providers that provide loans with limited recourse should the stock become worth less than what you exercised with in a liquidity event. (Be sure to read all the Ts+Cs).

Of course, anyone fronting the risk here will take a big part of the upside should your options eventually become good, they have to both cover their costs on your transaction, make a profit, and cover the costs on all the loans they'll provide for stock that will become worthless.