[ChuckMcM]

I'm not arguing, but I would like to point out that you've just fallen into the same trap I was discussing. According to the article the employees had a chance to sell shares at $3 a share, later it came out that an outside firm felt the shares were worth less. The trap is using information from later to beat yourself up about what you didn't do then.

It is an easy trap to fall into, you're in your own future looking back with more information than you had then, and you are seeing how you could have acted differently for a much better result. And then you beat yourself up for not acting differently. But the truth is it isn't your fault.

But the learning is, be more mindful of choices (and non-choices) and their future financial impact. It is much easier (and desirable) to see the "success" scenario, than it is the "failure" scenario, but if you work it out and sell half when you have the chance, then you reduce future outcomes to "only capturing half the value" and "giving up half the gain". Both of which are more tolerable than "losing all value".

[chockablock]

The article details examples of 'information asymmetry' between employees and execs, at the same point in time.

According to the article: -June 30: outside firm values common stock at $0.88 -'Late July': Board knows they only have 30-60 days of cash -'August': Some employees buy common stock at $3.34/share

[ChuckMcM]

There is always information asymmetry, sometimes situational and sometimes regulatory, its the foundation of the insider trading regulations.

The point is to know that there is information that you can't know which could swing the decision either way, and information you do know which could be true or false. And then objectively looking at your choices and deciding how much risk you're willing to take and then owning that decision, no going back later and beating yourself up for it because of something you didn't know.

As a startup employee, you need to be mindful of opportunities to convert your non publicly traded stock (or options) into cash. And then decide when (and if) those opportunities arise, what to do about it.

While some folks advise people to exercise their option when it vests so that later when they sell it they can get long term capital gains treatment, I advise them to not do this. My advice is based on looking at the four scenarios:

1) Don't exercise your options, stock is worthless

Total win, you didn't lose any money in the process.

2) Exercise early, stock is worthless

Total lose. AMT tax paid which can only be recovered $3,000 per year, money paid to exercise is all lost.

3) Don't Exercise, stock is worth 10x what you paid for it

Partial win, you get to pay for exercising the stock and the tax out of the proceeds of exercising and selling it, but you are taxed at the ordinary income rate and if you get into a high enough tax bracket a lot of deductions get taken away.

4) Exercise early, stock is worth 10x what you paid for it

Total win, you sell your stock and pay a minimum of tax on it.

Three "win" scenarios, and 1 total lose scenario. You remove the total lose by not exercising your option which leaves you with two "win" scenarios but not winning as much as you might have (lower risk, there is no "lose" scenario)

[steven2012]

This is the same trap that most stock traders fall into. I've spent a lot of time trading, and when I confer with some of my other friends who trade we always talk about how we bought too late, sold too late, sold too early, etc.

I came to the conclusion early that the only way a trader could be happy is if they bought at the very bottom and sold at the very top. Otherwise there was always a lingering sense of regret. The only way you could have done that is if you can see the future, which is obviously impossible, but your sense of regret doesn't think about that.

After that realization, I decided that I make my selling decisions based on best knowledge at the time of sale, and not to regret selling for higher later on, because it would be impossible to know if it went up further or not.

[rday]

+1 :) Fortunately this comment is the least expensive way to learn that lesson.