I worked for a startup and as an employee, was “granted” 34,000 “Options” and “vested” in 8,000 “Options (ISO)”. The company has not gone public yet but likely will in the next 3-5 years. I just left the company and the exit paperwork says “Upon termination, you have three months to exercise your Options before they expire.” I have no idea what this means. What happens if I exercise them? What happens if I don’t? What does it even mean to exercise them? Please help.
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Man people have some advanced five years old.
Your compensation included options to buy shares in the company. Your employment contract should have specified the price to exercise those options. I.e. cough up the money to buy the shares. You can choose to do this for 0-8000 shares.
Should you? I it depends. Having worked through the dotcom boom and bust, I’ve been there and had lots of friends who had options.
So for example I had options that were vested in a company that was not public. I could buy them for $9 per share. The company got bought out at $34 per share. To get my $34 I had to give them $9. Repeat for all the options I had vested. They were cool enough to just have you agree to get $25 and not have to come up with a big wad of cash out get nothing.
Now one of my friends as part of their benefits got options for a public company. They were given options with each pay period. Basically they had to pay $3.95 for each share or forfeit the option. Market price was well above $3.95. The option contract may be encumbered by other terms. In this case, if you left the company the company had the right to buy them all back at current market value rather than let you sell them on the open market.
They can also be a boondoggle. Like I knew several people who worked for dotcom startups with no business plan that gave them options at the ludicrous valuations they gave themselves. So paying $75 a share for something that nobody wanted would be unwise. Even with a more promising startup, there’s always a risk they have overvalued themselves. If yet give you a share for $125, and then go public at $55, you got screwed if you exercised your options.
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