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Its taken them a while, all their peers except for Amazon have essential gone to the dust. If Geocities had been bought by say Google instead of Yahoo I could h
by shams93 10y ago
Its taken them a while, all their peers except for Amazon have essential gone to the dust. If Geocities had been bought by say Google instead of Yahoo I could have easily flipped my options into my own startup. However dot bomb hit so hard instead of wealth I was left holding a huge capital gains tax bill that forced me into 10 solid years of hardcore poverty as most of my income was confiscated to pay off the debt. Not a nice outcome for companies bought by yahoo back in the 90s!
- encoderer 10y agoUgh. The era before amt credits was bleak.
- karma_vaccum123 10y agoYup. A lot of Yahoo's impaled themselves on "exercise and hold". "Same day sale" ended up being less risky.
- themartorana 10y agoHow do you not make money and still owe a lot in capital gains?
- deleted 10y ago[deleted]
- throwaway76543 10y agoGenerally this occurs when you exercise an option to purchase stock, then hold the stock while it significantly depreciates in value. Fairly common scenario during the dot-com bubble. 1) Option at $1 2) Exercise at $100, spending $1 to buy. Tax on $99 short term capital gains owed, or ~$35. 3) Stock falls to $10 and sold for a $9 profit. You still owe $35 capital gains and spent $1. Net loss of $25 per share.
- ajmurmann 10y agoDid you mean "2) Exercise at $100 [..]"?
- tuna-piano 10y agoWouldn't the prudent thing to do be to sell at least enough stock to pay the tax? If not allowed to sell at that point- just short stock to have the equivalent effect (minus fees)? Something else I've never understood to be rational - If you wouldn't buy $10 in yahoo stock- why would you hold it because you have it? My uninformed but seems logical answer would be sell the stock you got, pay the tax and buy and index fund.
- stepanhruda 10y agoThe stock needs to be public by the time you exercise to be able to do this.
- trimbo 10y agoWhen Yahoo bought Geocities, both were public.
- xxbondsxx 10y ago> Wouldn't the prudent thing to do be to sell at least enough stock to pay the tax? It's not liquid yet, that's the issue. That's what is nice about most RSU plans -- they immediately sell to cover, so you don't receive a ton of stock with an attached tax bill. But illiquid options are different; the capital gains tax is for the paper-wealth you just received. That same paper wealth can evaporate, but the tax bill remains.
- tuna-piano 10y agoSo you have an asset that is considered worth a price, but you cannot buy it or sell it at that price? Seems to me an unfortunate tax policy.
- deleted 10y ago[deleted]
- a_small_island 10y agoHave you written more about this? I would love to read more details.
- hkmurakami 10y agoOne person who avoided this was Mark Cuban, who bought a bunch of Yahoo! put options when broadcast.com was acquired, hedging himself against the stock crash.
- option_greek 10y agoNice strategy. I wonder why others didn't do it.
- majani 10y agoIf you read Mark's story, it's clear that he was aware of what was happening at the time but didn't drink the kool-aid, while if you look at the other dot bombs, they definitely thought the world was changing and the rules had changed.
- aerovistae 10y ago"Read his story" --> Can you provide a link to this particular story? I would be interested to read it.
- chkuendig 10y agohttp://investmentxyz.blogspot.ch/2006/05/cubans-collar-anatomy-of-famous-trade.html http://investmentxyz.blogspot.ch/2006/05/cubans-collar-anato...
- fdanconia 10y agoWhat it seemed like to me reading over the stories of Mark Cuban was that he realized (with the help of some frugal advisors) that he just made a ton of money on paper and didn't want to lose out transferring that into real actual dollars in the bank. It just seemed he had different goals than everyone else: everyone around him wanted to get as rich as possible, Cuban seemed to want to have as much money in his bank account as possible. Two very different things.
- retube 10y agooh man the US tax code is so f*cked