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.
In: 72
The specifics of your option grant matter a lot. But based on what you said, you have 8,000 stock options in your company (the rest of the granted ones are likely void now that you’re leaving). There will be a strike price associated with those options. Let’s say the strike price is $1. You have the option to buy up to 8,000 shares of your company for $1 per share. If it were a public company, you would only do this if the current stock price was greater than $1. So if the stock was trading at $2, you would exercise your options. That would mean you would effectively buy the stock for $8,000 and sell it for $16,000, pocketing $8,000.
Since it’s a private company, it’s probably harder to sell the shares, or even determine their fair market value. It’s hard to know without seeing the grant document, but you can probably pay the grant price for the $8,000 shares. And you may not be able to sell them unless/until the company goes public. It’s not as clear cut a decision as it would be for a public company, but if you think the company will go public at a higher valuation than your options were granted, it may be a good deal. If you’re at all unsure about that, I’d pass and let them expire.
Latest Answers