IPO
An initial public offering is a process in which a company’s shares are up for sale to the investors. In other words, we say can when a company goes IPO it’s time for you to sell your stock options for a handsome amount because it is now publicly available for investors to buy. This is now when it’s time to start trading stock options: stockkingoptions.com.
Company Stock Options
Companies are initially private and all the dealing of stock options are also private which means the employees can exercise their stock options within the company only and usually at the initial stage your stock options might not be worth good enough because there is no market for it as they are not publicly available and they will not get the amount they are worth.
It takes time for a company to go IPO but it is not the same for every new company or start-up, there are some examples where a private company sold its shares to a third party, I am talking about Uber through its ‘two, count ‘em two tender’ offers.
Having known that private company stock options are not that profitable at the start should not make us de-motivated a person who cannot take risks, cannot grow further in life. Even if your stock options do not worth any money for now but owning a private company’s stock is exciting because it has the potential and may turn into huge profits when your company goes IPO.
Risks
As I have mentioned about taking risks above, let see what risks do we have when we buy a private company’s stock options,
By risks, I mean ‘uncertainty’ because you do not know the actual worth of your options and you exercise your options before your company goes IPO and when the company is up for IPO you get to know that your options are worth way more than you sold them for, but this is not the only possibility, it may also happen that you waited all these years and kept your shares for the time the company goes IPO and the shares are not worth it, but that does not happen usually, it is just a possibility. One should always look for the brighter side and make some efforts for it.
Company Going IPO
The price of your company’s shares are publicly known when the company goes IPO and the price can vary every day, every minute, so you should be patient and look for the right time to sell them or exercise them and not make haste selling them as they are available for sale. As we know that tax actually depends on the stock value of a company, every company has stock values if you do not know about them you should ask for the 409(a) valuation of your company. Now that you have all the information about your stock options prices and market values you can compare the cost and price and make big profits.
The lock-up period is a time when the company goes IPO when employees can sell their shares but some employees are obligated not to sell their shares, lock-up period is usually between 90 to 180 days, though this time can vary. Those employees who fall in the lock-up time are mostly highly designated persons such as CEO, CFO, etc. Companies willingly stop them from selling their shares to prevent overloading of the market with too many shares, which can lead to lower stock prices.
Lock-Up period
If you happened to fall into a lock-up period, do not think that you cannot do anything. You can still learn and plan about what to do when your IPO lock-up period is over. Make sure to read the document containing the information about your lock-up period and what happens to your options during this time.
