Cashless exercising or same-day-sales are one option open to employees of public companies as well as some private companies. Understandably, this option is dependent on the availability of a secondary market for the shares. Most private companies do not have a secondary market and generally only those that do will allow employees to cashless exercise. So unless you work for a highly sought after private company, you may not have the ability to cashless exercise. A promissory note is essentially a loan.
The company loans the employee the purchase price of the stock and in exchange the employee promise to repay the company the full amount plus interest by a certain agreed to date.
However, it never hurts to ask if your stock plan allows for it! If you already hold shares of common stock in the company, you may be able to surrender the number of shares equal to the fair market value of the option shares. Similar to the surrender of stock, net exercising involves using a portion of your option shares to pay the full purchase price. The company determines the fair market value of the options at the time of exercise and reduces the total number of shares issued to the employee by the number of shares necessary to pay the full exercise price plus any required tax withholdings.
To figure out whether your private company allows any of these options, either check your option grant paperwork and the company stock plan or ask the company. Keep in mind that no matter how you do it, exercising your options could have tax implications. Make sure to talk to your personal tax advisor or an attorney before purchasing your shares. Notify me of follow-up comments by email.
Notify me of new posts by email. Is it possible to do a cashless exercise of stock options in a private company? Promissory Notes A promissory note is essentially a loan. Surrender of Stock If you already hold shares of common stock in the company, you may be able to surrender the number of shares equal to the fair market value of the option shares.
Net Exercising Similar to the surrender of stock, net exercising involves using a portion of your option shares to pay the full purchase price. Previous Article What are all the classifications of equity in a startup and who typically gets what? Next Article Paysa CompanyRank: Leave a Reply Cancel reply Your email address will not be published. Thank you for subscribing.More...