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Do the math on your stock options

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Re: Do the math on your stock options

#231

Post by mpdehaan2 »

s73v3r wrote: post #206
mpdehaan2 wrote: post #128

Earlier quoted context omitted.

Reasons exist.... One reason is likely that they want to keep the valuation confidential outside of the company (people talk), because as a private company that information doesn't have to be public. It's not a great reason for the employees - but it's there, nonetheless. It's tricky to share that with employees and not have it get out. That being said, if it were all public, I think that would be fine, I'm not sure…

"Reasons exist" And absolutely none of them are valid. If you're going to have this person work on the core of your company, there is absolutely no reason to not be up front with them.

It's quite valid and exists as a reason, you just don't agree with it :)

Re: Do the math on your stock options

#232

Post by inthewoods »

finance-geek wrote: post #157
inthewoods wrote: post #72

Great thread here and the original article has some excellent points. I recently left a company and explored executing my options via a vehicle called ESO Fund (www.esofund.com). In the end I did not use them for different reasons, but their offer was reasonable. Two general comments on stock options: - Remember that bad things happen in companies in raising money. Your company could raise another round after you've…

Seems like almost a total fail for me...50% over 9 years is about 5.5% return a year for a VERY risky asset. Something that risky warrants more. Also curious if that 50% return considers the upfront outlay, taxes upon grant, capital gains taxes, and the works...

It's 50% on top of initial investment and net of capital gains. But you're right - it's more or less a total fail. It was a small amount of stock, but right after I sold it I realized I probably should have just held it to see if they went public.

Re: Do the math on your stock options

#233

Post by mpdehaan2 »

morgante wrote: post #223
mpdehaan2 wrote: post #109

Earlier quoted context omitted.

Righto, and asking a lot of demands/questions means the company is not going to like you as much and will influence your relationship after the offer is accepted. The info you get will be standard and there is certain info they are not going to want to share. Basically a casual ask for "can you share how many options are outstanding?" is about as good as you are going to get. Totally good. Non-stand demands? Not so g…

> will influence your relationship after the offer is accepted. It will influence your relationship, positively. Executives and managers always pay attention to these details and negotiate them when joining a company. The fact that you're paying attention signals that you actually understand what's going on and demands respect. Some companies will refuse to give you this info and resent you for asking, but you should…

Err, no. Not always.

If a "rank and file" developer goes back and forth grilling them over offer terms, and is exceptionally picky above his peer group, this DOES make it back upstream in negative ways.

Some companies will not give you this as a matter of policy - , if you are ok with the salary, you could still enjoy working there - and may also make a great deal of money (or you might not).

Re: Do the math on your stock options

#234

Post by kooshball »

AndrewKemendo wrote: post #142

Options are for suckers. Do you want to be an investor? No? then why would you pay for stock out of your own money? At our startup everyone gets the same stock, not options, through our Equity Incentive Plan. Here's how it works. 1. We lend new employees the amount of money it would take to buy common stock on a non-recourse promissory note the collateral in this case is the stock itself. 2. The employee then buys th…

How does vesting work with this system?

Re: Do the math on your stock options

#235

Post by rb2k_ »

wdewind wrote: post #200
eridius wrote: post #152

Earlier quoted context omitted.

If the company isn't public, presumably you can't exercise risklessly, right?

Mostly true but sometimes you can sell on a secondary market or through a tender offer.

At least for one of my previous employers, the secondary market was not interested. I personally wouldn't count on it unless one is working for a highly visible startup ;)

Re: Do the math on your stock options

#236

Post by [deleted] »

mpdehaan2 wrote: post #231
s73v3r wrote: post #206

Earlier quoted context omitted.

"Reasons exist" And absolutely none of them are valid. If you're going to have this person work on the core of your company, there is absolutely no reason to not be up front with them.

It's quite valid and exists as a reason, you just don't agree with it :)

[deleted]

Re: Do the math on your stock options

#237

Post by morgante »

mpdehaan2 wrote: post #233
morgante wrote: post #223

Earlier quoted context omitted.

> will influence your relationship after the offer is accepted. It will influence your relationship, positively. Executives and managers always pay attention to these details and negotiate them when joining a company. The fact that you're paying attention signals that you actually understand what's going on and demands respect. Some companies will refuse to give you this info and resent you for asking, but you should…

Err, no. Not always. If a "rank and file" developer goes back and forth grilling them over offer terms, and is exceptionally picky above his peer group, this DOES make it back upstream in negative ways. Some companies will not give you this as a matter of policy - , if you are ok with the salary, you could still enjoy working there - and may also make a great deal of money (or you might not).

> Some companies will not give you this as a matter of policy

Then don't work for those companies.

Ones goal in life should not be to get exploited at shitty startups as a "rank and file" developer (aka chump).

Re: Do the math on your stock options

#238

Post by ewams »

sokoloff wrote: post #218
idunno246 wrote: post #214

Earlier quoted context omitted.

Lets say the fmv in 2015 is $500, and your strike price $100. If they are ISO, in 2015 you own no regular tax on it(thats the Incentivized). In 2017 you owe capital gains on $900. However, AMT(alternative minimum tax) doesnt recognize ISO. So in 2015, you have to calculate AMT, which $400 counts towards. This is basically a no-deduction(except a high standard deduction) flat tax, you potentially owe 26-35% on that 40…

For completeness, on ewams' question: if the options are non-qualified (NQSO instead of ISO) and FMV at the time of exercise was $500, you would owe ordinary income tax on $400 ($500-$100) of income in 2015 tax year and long-term capital gains on $500 ($1000-$500) in 2017 tax year. Not a tax pro; this is not tax advice; yada yada.

Do companies actually change the type of options to NSO, ISO, RSA, RSU, etc? Or are they usually stagnant and non-negotiable?

Thanks for responding folks.

Re: Do the math on your stock options

#239

Post by sokoloff »

ewams wrote: post #238
sokoloff wrote: post #218

Earlier quoted context omitted.

For completeness, on ewams' question: if the options are non-qualified (NQSO instead of ISO) and FMV at the time of exercise was $500, you would owe ordinary income tax on $400 ($500-$100) of income in 2015 tax year and long-term capital gains on $500 ($1000-$500) in 2017 tax year. Not a tax pro; this is not tax advice; yada yada.

Do companies actually change the type of options to NSO, ISO, RSA, RSU, etc? Or are they usually stagnant and non-negotiable? Thanks for responding folks.

ISOs have a set of specific qualities that must be present to be treated as ISOs. Most established companies issuing options will be NQSOs. RSUs are a lower volatility version, but with less flexibility in terms of timing (I can't delay "exercising" my RSUs in terms of timing when I recognize the income).

You can make ISOs be treated approximately as NQSOs, but otherwise, you're generally getting from an established program and within a company, you don't have to be prepped to negotiate one type vs the other. Over time, the company will no longer be able to issue ISOs and may implement other programs, but they will tend to be "one type fits all" in general.

Re: Do the math on your stock options

#240

Post by Mrmcfeely8 »

AndrewKemendo wrote: post #142

Options are for suckers. Do you want to be an investor? No? then why would you pay for stock out of your own money? At our startup everyone gets the same stock, not options, through our Equity Incentive Plan. Here's how it works. 1. We lend new employees the amount of money it would take to buy common stock on a non-recourse promissory note the collateral in this case is the stock itself. 2. The employee then buys th…

If the company goes bankrupt, though, can't a bankruptcy trustee go after the employee to try to collect on that loan?
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