4 ms·
I have a question: I know for sure that my company is going to IPO this year and I plan to stick around to see it happen. By the time it happens I will have abo
by annetee 10y ago
I have a question: I know for sure that my company is going to IPO this year and I plan to stick around to see it happen. By the time it happens I will have about 30% of my options vested which I could choose to exercise.
Is there any reason why it might be advantageous to exercise early? My current plan is just to see how the IPO goes and then consider exercising at that point - it means a lower risk for me because I'll know exactly what they're worth and if they're even worth buying.
- nojvek 10y agoIf you exercise early and hold it for an year before selling them for cash then you pay less tax. The way I see is options only make sense when you have the following aligned. 1) Employer grants options. 2) Every pay check you save enough for strike price and estimated tax hit. 3) Exercise early when the price is low (assuming IPO will happen while you're still employed) 4) Sell when IPO or later when price is good after one year or more of exercise. Or may be sell in bits to stay under the aggressive tax rates.
- nemo44x 10y agoYou would begin to qualify for long term capital gains which is taxed lower than the higher end of your income, presumably. You can sell your stock 6 months after it goes public so if by then you qualify for a long term capital gain (1 year holding an asset) you get taxed at this advantaged rate. If you will likely make a substantial amount of money (100k+) this could be a lot of money you save. Of course you assume the risk of being an investor and you could lose money if it all goes south!