Exercising options months prior to your company’s IPO filing could allow you to benefit from long-term capital gains rates as soon as you become able to sell company stock after the IPO. However, exercising options could also result in incurring significant tax liability with no immediate cash proceeds to pay the IRS.
Should I sell my shares before IPO?
The short answer is yes. There are secondary markets where you can list and sell your private shares—if someone wants to buy them. And if you’re in need of cash right away, secondary markets can be an ideal solution.
What should an employee do before an IPO?
Four Things Every Employee Should Consider 1 Exercising your stock options prior to the IPO. 2 Consider gifting some of your stock to family or charities. 3 Develop a post-IPO-lockup-release plan for selling stock. 4 Deciding how you will manage the proceeds from the sale of your stock. …
When to exercise stock options after lock up period?
Once your shares vest (assuming you are past the lock-up period) you can look at the market price of the stock vs the exercise (or strike) price of your options. This can help you determine if you want to exercise or not. Again, there are tax consequences so it is important to work with your financial advisor and CPA first.
When to offer stock options to startup employees?
Offering stock options, then, can be a way to make up the difference between what you can pay them and what they should be paid. Experts recommend that this gap be covered for generally around two years — but each company’s mileage may vary.
How long do you have to wait to sell your stock after an IPO?
Therefore, even if you you wanted to sell your stock you would be unable to for at least nine to ten months from the date your company files to go public. Twelve months is not a long time to wait if you think your company’s stock is likely to trade above your current market value in the two or three months post-IPO lockup release.
