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ISOs are priced at the 409a value, which can be 1/10th of the preferred share price. Generally speaking, the 409a value converges with the preferred price as th
by dpiers 9y ago
ISOs are priced at the 409a value, which can be 1/10th of the preferred share price. Generally speaking, the 409a value converges with the preferred price as the company is de-risked and moves closer to IPO.
- morgante 9y agoRight, but for later-stage startups I can certainly imagine average employees hitting the exercise cap.
- dpiers 9y agoMost companies move to RSUs by the time typical employees would hit the exercise cap.
- hkmurakami 9y agoIt's as if dpiers read my mind! :) My arguments exactly mirror what he/she has said.
- djrogers 9y agoThat cap already exists now and is untouched along with the rest of section 422.
- hedora 9y agoThe caps are based on the value of the ISO when it vests, not when it is granted. If you exceed the $100K limit, then the options revert to NQs (and would presumably be subject to retroactive withholding, under the new rules). This will hit companies that are within a few years of IPO particularly hard, since right now, they can use stock incentives as a significant recruitment tool, and large, unknown, multipliers between grant price and vesting prices are the norm. Put another way, this will cripple the hiring ability of companies attempting to grow from $100M to $1B valuations, and make it much more likely for them to exit via acquisition instead of via IPO. This significantly reduces the incentives established companies will have to innovate, and is a classic example of regulatory capture. (Also, other parts of this tax plan will significantly increase taxes for students; especially graduate students, and also people that live in tech hubs like CA and NY. It is an overt attack against startups and other portions of the economy that have created most of the economic growth in the US over the last two decades.)
- djrogers 9y agoThis is nothing even close to regulatory capture. It may not be a good thing, but you can't just throw random terms at it and expect them to work... This policy has a) nothing to do with regulators or a regulatory agency, and b) is not a result of a regulated industry subverting the agent of it's regulation. Also, the 100k cap you're complaining about already exists. I'm not sure what your rant even means at this point.
- cpitman 9y agoIf I vote for a state government that maintains higher state taxes, why should that decrease what I owe to the nation? Am I getting less benefit from the federal government? Also, those states can always lower their taxes in the future.