[pfarrell]

"Don't spend real money on fake money."

Good advice I got from colleagues at a 2000 era company who took out loans to buy their options and cover the taxes when the stock was at $50/share and then watched it drop to <$1/share while they were in a lockout window. I worked with people who had 6 figure loans they owed on for worthless stock. Took years for the stock to recover.

[dominotw]

This is me currently. Bought my options before IPO markets went bust. Gives me anxiety when i think about it. Just reading this comment made my heart rate go up :(.

[pfarrell]

I am not a finance person, but maybe you should talk to a tax attorney or tax planner. That kind of person may be able to offer some guidance on what you can do. Good luck and remember at the end of the day, it's just money and you can recover no matter what.

[dominotw]

Thank you. Will do!!

[bogomipz]

Why would they have taken out a loan to buy their options? If the options are vested you can just sell them and pocket the difference between your strike price and the buy offer. If the options weren't vested you can't buy them anyway and you would still have the same strike price when they did vest.

[adrr]

Sell them to who? Are there any secondary market sites still running. Otherwise, you're cold calling investors. I tried to sell my shares in a startup to cover my six figure tax bill and couldn't find a buyer even with the company's CFO helping me.

[bogomipz]

The OP I was responding to was clearly talking about a publicly traded company - "the stock was at $50/share" and "Took years for the stock to recover." They could sell them to anyone who wanted to buy them and clearly people did if it was going up.

To answer your question, yes there are still companies that facilitate the secondary market for pre-IPO options, Forge/Sharespost is the one that immediately comes to mind.

[dominotw]

All those markets are currently dead. Been searching high and low on all those sites for my options but all the sites went completely quite last 3 months.

[pfarrell]

In this case, the company had gone public, so they could have sold. Bolt is a wholly different story. I think the employees back in 2000 had one window where they could sell where the stock was at a high value. Many of them passed it up, expecting it to go to 70.

In 2015, I talked to ESO fund for some fintech options I had where I couldn’t cover the tax when I quit (stock wasn’t public). I was very satisfied with my dealings with them. Ultimately, they pulled out on the deal. That was a pretty strong signal because, low and behold, that pre-ipo stock tanked in a month too. Luckily, the lessons I’d learned from the earlier stories helped me to walk away from those options. It was a tough, but ultimately good decision.

[adrr]

It's all luck and timing. The company I couldn't sell the shares to cover my tax bill was acquired for nine figures a year later and I had all my stock because I couldn't sell it.

[pfarrell]

Short answer: greed. They didn’t want to give up any shares. To pay for the tax they owed between strike price and current market value, they should done a cashless transfer and sold off a portion to cover the taxes and then held the remaining for a year to get capital gains tax treatment. I think ultimately they didn’t think the party would end. I had some coworkers there who had sold stock when they could and were thought of as leaving money on the table because the stock can only go up. Those ended up being the smart ones. But hindsight is 20/20

[yardstick]

> Short answer: greed. They didn’t want to give up any shares. To pay for the tax they owed between strike price and current market value

Greed by the taxman.

It would be a non-issue if the tax authorities collected the tax at the point those shares are converted to something else, or used as collateral to a loan. But to tax them without any ability for the employee to extract value from them - especially relevant for privately listed companies with glacially illiquid stock - is abhorrent.

But instead the taxman has to always be the first to eat the pie. Even if that pie never turned into anything real.

In the UK it is horrid- share options of any meaningful value are taxed at ~%63 (including all hidden National Insurance taxes) and it could be years before you can cash your shares, if at all.

[zszugyi]

I'd guess they wanted to hold the stock for 1 year after exercise to qualify for long term capital gains, but this would likely trigger AMT. Not sure if this has been the case back in the day though.

[maxerickson]

They wanted to keep the rocket ship stock...

[scarface74]

More like Monopoly money.