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Just when I thought I was getting the hang of how equity works... I didn't understand a word of that (other than non-transferable exercised options).
by BigJono 9y ago
Just when I thought I was getting the hang of how equity works... I didn't understand a word of that (other than non-transferable exercised options).
- deleted 9y ago[deleted]
- toomuchtodo 9y agoApologies, I overcomplicated it. Someone lends you money to exercise your options, you pay them back (at IPO or acquisition) as well as additional compensation for their risk of your shares being worthless.
- lasgsf 9y agoYup that is what equidate does. Basically a forward contract on the underlying shares. I have done this with some AirBnB shares.
- mrgordon 9y agoHow was the experience overall?
- lasgsf 9y agoOverall was pretty easy and painless. In general I pretty feel good about it as they mention that the underlying principle is backed by insurance so if the counterparty does not transfer shares over you can get your principal back in theory.
- JumpCrisscross 9y ago> Someone lends you money to exercise your options, you pay them back (at IPO or acquisition) There is a lot of uncertainty about whether these loan-and-pretend or forward structures violate the spirit of one’s stock option contract, which can and has resulted in forfeiture, and if it involves creating an off-exchange securities swap, illegal since Dodd Frank for non-qualified participants. It was receiving regulatory attention before cryptos distracted everyone. (One firm even got jammed by the SEC early on for structuring illegal swaps.)
- lasgsf 9y agoHow would that invalidate the option contract? As far as the company is aware the option was exercised under the employee name and stays that way indefinitely till an IPO event. Post-IPO the shares are prob deposited in Computershare and as a shareholder you can transfer it to anyone you want.