31–40 of 89 posts
When it comes to stock options, HN has taught me two things: 1. They are worthless, as >90% startups fail and you won't be getting anything in that case. 2. If they are not worthless, you might not be able to afford paying for them anyway [1]. Add to that how difficult it is to get a simple, clear answer to the question "how do I invest my money?". So yes, I wouldn't be surprised if most people didn't know how stock…
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big companies like Microsoft/Google/etc don't even offer most of their employees stock options, but instead they offer RSU (Restricted Stocks Units). Those are easier to understand, there's no exercising decision to be made, you just need to know your vesting dates. The biggest decision is : Do you want to sell your stocks before or after the 1 year Long term capital gain wait, but that decision is common to all stoc…
> The biggest decision is : Do you want to sell your stocks before or after the 1 year Long term capital gain wait, but that decision is common to all stocks. The decision is more along the lines of sell now vs. sell later. The LTCG decision is not nearly as important. The conventional wisdom is just to treat the RSU as the same as salary by selling immediately upon vesting. Since you're already employed and paid by…
No, this is not just a problem you're having. I was an early engineer at Zenefits and found myself holding stock options seminars to explain this stuff to the rest of the engineers. I built optionvalue.io as a calculator to help people answer some basic questions about what their stock is worth, and I'm building it out more to answer questions (eg, tax implications and exercise windows). I've talked to grellas and so…
This is a tricky position to be in, considering that in this sort of situation, you're generally explaining to people a small subset of the ways that they can get screwed. As much as it might seem nice to see people spending lots of time trying to figure out what their stock options are worth, it's not worth the time or effort. By the time you have it figured out, it's changed. And the future is so unknown. If everything goes great and the company hits all of its targets, stock options will be worth something. If there's a bump in the road, you're toast.
This bears posting, it explains actual stock options , not what employees/employers bandy about as "stock options". http://www.investopedia.com/exam-guide/cfa-level-1/derivativ...
recently I left a company after 3 years, with a decent chunk of options in my comp. the company is not publicly traded, is still deep in the red, is still trying to raise more rounds of venture capital (thus increasing dilution), and has no exit in sight for the foreseeable future.
My cost to exercise my options at their strike price would have been just over $8000 bucks, and then there would be additional taxes on top of that for whatever the face value of the purchased shares would be. These are illiquid assets, mind you, so the face value would be taxed, but there were no buyers, so it's just an outright loss.
I left those options unexercised. I certainly didn't feel like donating $8000 bucks to my former boss' checking account and then paying extra taxes on it all for the privilege of sitting on illiquid assets for an indeterminate number of years (with a high probability of the stock never being worth anything at all).
Understanding the structure and fees and taxes of the options is very important specifically so you don't go and throw good money after bad in situations like this.
I hope you are taking into consideration the capital gains tax when it comes to the difference between strike price and the current fair market value of the stock. If a company is growing fast or takes on money, this can change alot in even a year.
The IRS doesn't care that you may not be able to actually recognize that gain because you cannot actually sell the stock, it's considered a gain nonetheless and you will owe tax on it.
I have been in a situation where the FMV of my stock changed by 10x in the span of a year and by the time I could have actually bought any stock the tax bill would have bankrupted me.
I say this as someone who worked in insurance, which is a financial services industry subject to federal financial regulations, such as Gramm-Leach-Bliley. So, it is not just my opinion that I know more about finance than average, I also have relevant training. And I only have a vague, hand-wavy idea of what you are talking about.
I worked at a pre IPO company a few years ago and it was an exception to find people who understood how things worked. Hell, even I missed some details back then, and it was only after I put in hours of research that I developed a decent grasp of the tradeoffs and deadlines. I still don't really know how to do AMT though. There are a couple of startups that make it a point to early through what their equity means wit…
This seems impossible; stock options just aren't simple. There is no way for most employees to get enough information in a reasonable amount of time to make an accurate estimate of their stock options' worth.
Employees probably aren't privy to bank loan terms (e.g. converted to preferred shares in certain conditions, over time). They aren't privy to the preferred share terms (past, current or future). In the case that an employee has to purchase their shares prior to a liquidity event, they have no way to know what the future holds in terms of dilution.
It's an exercise in futility. Even if you make logical guesses, guesses are worth very little. If the economy tanks, and suddenly there's a cash crunch, your best guess may not apply. Even if things go WELL (but not smashingly well), you can get screwed by weird preference issues, dilutions or other shenanigans that weren't public knowledge that kick in.
An option to buy stock puts you last in line for money. If everyone else gets paid (vendors, banks, VCs and founders), you'll get a share of what's left (after a lock-up period). There's no good way to know what that's worth.
https://github.com/jlevy/og-equity-compensation
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Even though anecdotally, I have made some money on option grants, I now see them as a symptom of cargo-cult management practices. A few weeks ago, a co-worker asked me for advice about a new (to us) employee stock purchase plan, and I basically said, "don't shit where you eat." Messing around with your employer's stock isn't a wonderful idea. Most people should just be blindly investing x% of their income in a robot-…
To play devil's advocate though, you are being provided more information than the external market would be by virtue of being an employee of a company, and also someone working in the industry, etc. Having more information at your disposal to evaluate a company means that option grant is worth more to you than to a random person on the street, which is why the company will pay you in options. It's better for the comp…