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Do you need to front the cash for stock options with a company?
Posted on 9/17/24 at 11:13 am
Posted on 9/17/24 at 11:13 am
Working at a place that purports to be approaching an IPO. I'll have about 18 months of vested shares at that point with more vesting monthly. We've got a strike price of just over $10.
When exercising these options, do you need to have the cash on hand to be able to buy them or can you just "sell" some of your shares to cover the purchase?
When exercising these options, do you need to have the cash on hand to be able to buy them or can you just "sell" some of your shares to cover the purchase?
4
Posted on 9/17/24 at 5:48 pm to Thundercles
You can sell to cover within the platforms
Posted on 9/17/24 at 9:23 pm to Thundercles
Why exercise before the change in control? If vested, would highly likely be net settled.
Posted on 9/18/24 at 2:07 pm to Thundercles
The company is only giving you options, not stock, to buy at a price that you expect to be under the IPO price?
Posted on 9/19/24 at 5:58 am to Thundercles
My companied offered these to me 3 different times in my career. When you exercise, you are buying the stock at the strike price and immediately selling for the current price. This is all done in a single transaction (from your perspective).
For example:
Your strike price is $10 for 1000 shares. At some point in the future, the stock price is $15 and you decide to exercise all 1000 shares. You will keep the difference (which is $5 for 1000 shares = $5000). The IRS will require your employer to withhold about 1/4 of that $5000. When you file your 1040, you will report the stock option transaction as capital gains (sold $15000 of stock, with a basis of $10000). After filing the 1040 you could either owe more tax or receive a refund depending on your tax situation.
I suppose you don't have to sell when you exercise, but then you would need to PAY $10000 to hold the stock. 99.999% of people do not hold stock after exercising employee stock options, they just get the cash like I described in the example.
For example:
Your strike price is $10 for 1000 shares. At some point in the future, the stock price is $15 and you decide to exercise all 1000 shares. You will keep the difference (which is $5 for 1000 shares = $5000). The IRS will require your employer to withhold about 1/4 of that $5000. When you file your 1040, you will report the stock option transaction as capital gains (sold $15000 of stock, with a basis of $10000). After filing the 1040 you could either owe more tax or receive a refund depending on your tax situation.
I suppose you don't have to sell when you exercise, but then you would need to PAY $10000 to hold the stock. 99.999% of people do not hold stock after exercising employee stock options, they just get the cash like I described in the example.
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