[subsubzero]

I gave my Wife money to exercise her ISO's(startup before IPO) for her first 1.75 years of shares when the company valuation hadn't changed. Her company went public and the stock jumped and then crashed, I think the current price per share is lower than her exercise price so she is underwater and the money I gave her is worth less as shares vs. cash I originally gave her. Really a huge bummer as this job up-ended our life and she has absolutely nothing to show for 3 brutal years of hard work. I guess the only thing is wait it out and see if the shares recover.

[twiceaday]

I advise you to think 'if I had the value of these shares as cash would I spend 100% of it on shares of this company?' The loss already happened, that part is done. The shares have no memory and won't 'rebound' like a rubber-band just because they were down before. What matters is new things that the company does going forward, relative to all other companies.

[bagacrap]

sure, but if you sell out of every investment every time it goes down in value you won't be very successful

[s0rce]

I don't think that's what he's saying. He's saying the fact that it went down doesn't matter and you need to decide now would you invest that capital in that stock.

[subsubzero]

So I think the company is solid, leadership great, product great etc. its just the stock is in the toilet, she is not selling right now, its just a bummer dealing with all the work she put in, the forced relocation, and personal money put into this company.

[exac]

In my humble opinion, this is a sunken cost. Diversify at the very least.

[lmeyerov]

Most VCs liquidate most of their position around IPO except for really blowout exceptions, so that should tell you something about what the smart early money does on IPOs :)

We were in an ipo just recently with same-but-different setup:

- sold some immediately at the pop to recuperate the principal

- ... Note this may count as a short-term capital gain (< 1yr, ...) with higher taxes, so factor in. That makes a floor.

- In retrospect, I should have examined the P/E ratio and sanity checked revenue growth against growing into a reasonable P/E multiple, and raised the floor based on that difficult road, but was lazy :) There are other ways to quickly handle risk for the private/public transition: something is better than nothing.

- we kept the rest bc we liked the company long-term, incl.desired risk, vs wanting to pay taxes to diversify it. It of course went way down below the pop, and markets now stink, but everything at this point is 'free money' that we are ok with. We view it as a long-term holding so are ok with that

- If it fails to go an upswing over the next couple of years, we'll sell at a more forgiving long-term capital gains tax rate. Likewise forced to bail sooner if tanks below market.

Everything happening now is basically profit, and we are ok with most outcomes. The real risk was pre-IPO, and the rest is about profit handling. If we had held even earlier-stage shares, as in the early employee or VC case, we would have sold more.

[jazzkingrt]

I don't think VC money is "smart money", it's just not designated for investment in public markets. The "expertise" of a VC is in private growth equity, not liquid public stocks.

[lmeyerov]

Yes and no:

- Sure, some long island hedge fund genius is probably smarter at finance than some bay area VC for reasoning about most public companies

- But the professional VCs who have been in a specific company for 4-10 years, watching the team+category outperform 90% of the rest of their portfolio & their many competitors, and fighting for them round after round & pivot after pivot, have a much better sense of hold/sell vs some quant who doesn't know all that. That's a lot of insider knowledge for a finance professional.

[edgefield]

This is the sunk cost fallacy. The best option might be to leave and find something else.

[s1artibartfast]

They are talking about the shares, which are already fully owned and liquid.

The question is to sell them and invest the cash somewhere better(??) or HODL.

[refurb]

It's a startup before IPO, so not liquid (unless the company offers to buy-back).

This is a great reason to value options at $0 when taking an offer. It's a lottery and you shouldn't assume you'll see any money from then. If you do, it's all gravy.

[s1artibartfast]

You missed the part where they said they are now post IPO

>Her company went public and the stock jumped and then crashed,

[anonymousiam]

Options are not shares -- they are an option to buy shares at a specified price.

[danachow]

> I gave my Wife money to exercise her ISO's

Did you miss this part?

[anonymousiam]

I did not miss it. My reply was to the parent post by s1artibartfast (nice HHGTTG reference), who said; "They are talking about the shares, which are already fully owned and liquid.

The question is to sell them and invest the cash somewhere better(??) or HODL."

[danachow]

I still do not understand your objection, since the whole thread has been about shares, not options. The options were already exercised so what they are holding onto are these now likely worthless shares.

[subsubzero]

We don't need the money so right now its HODL :)

[roflyear]

Yeah. This is why options mean nothing. The business gives them to you and most of the time they even think they are worth something. But they aren't. Take cash. If they don't want to give you cash, you best be ok with your comp.

[TameAntelope]

How do you give your wife money? Just seems odd.