Would you exercise these stock options?

[pihacker2011]

Hey all,

I have a scenario I'd love to get the community here to weigh in on.

I've been working at a startup the past 5 years. I was roughly employee #1 and have helped grow the business from no revenue to a run-rate of $7M. I've worked alongside the CEO the entire time running sales for the organization. I've closed more than 85% of our clients thus far.

I was awarded a fair amount of equity early on at the unit price of ~$0.35 with a 4-year vesting cliff. All the documentation has standard language regarding exercising and vesting periods etc. The current fair market price is in the ballpark of $1.50.

I'm ready to move on to my next opportunity and I'm considering buying my options which I have the cash on hand to do so. Well, the problem is the CEO is saying that equity granted is not eligible for purchase by departing employees, despite the legal documents saying the contrary. He's stated that he views equity as valuable only to employees who stay long enough until a liquidity event.

The situation isn't whether legally I'm able to purchase my options, or whether their value will appreciate. The issue is that my CEO has been a mentor who has helped me build an invaluable skill set and a friend but is pushing back on my ask to purchase my options.

He is extremely set in his view and feels that by me wanting to purchase my options I'm somehow am personally taking advantage of him or his business. My thinking is either: I exercise these options at the risk of being blacklisted by my CEO and the connections in our networks with a vendetta held over my head or deciding to move on and invest my money in myself and future projects I embark on while maintaining a professional relationship with my CEO.

Thoughts?

[al2o3cr]

    He is extremely set in his view and feels that by me
    wanting to purchase my options I'm somehow am personally
    taking advantage of him or his business.

Funny, since by trying to get you to forgo part of the compensation HE AGREED TO he's attempting to take advantage of you.

If he doesn't want those options exercised, he should be prepared to replace them with something of equivalent value.

[pihacker2011]

That's an excellent point and great suggestion as an alternative option. Thanks for sharing it. I'll bring it up during my discussion with him.

[chopete2]

I think the main reason he doesnt want you to exercise is nothing about being personal. He is legally liable to expose significant amount of information about the company to you going forward, whether he likes or not, which includes every fund raising, aquitions, 409 and more.

My other surprising thing is, how could you be a sales guy, doing 85% of 7M and still be naive to believe in personal vendetta?.

Either you are too young or something is missing in the story.

[pihacker2011]

Thanks for the additional insight into his possible perspective.

As for your question - I joined the company while still in my undergraduate studies and it has been my only "real world" work experience thus far. I'm guessing the point you're trying to make is that business is business and not personal?

In that case, I shouldn't have any hesitation to exercise since it's legally viable to do so. Regardless of what that may do to the relationship and potential opportunities in the future. I understand your point, but at the same time, I still feel (maybe my naivete) that there may be some negative recourse for doing something that he feels so strongly opposed.

[chopete2]

What is the AMT amount you are looking at?

Even for 100,000 options, you have to pay tax on $115,000 i.e $40,250

(28% federal tax, 7% CA state tax)

[pihacker2011]

AMT is in the ballpark of what you shared. I included it in my calculations for the cost to exercise in addition to the options when evaluating if it would be a worthwhile investment or not.