Stock Option advice

[antirabbit]

SO, today I was laid off.
I have approx. 30,000 options of my company shares at around $1.00 a share.
We are still Pre-IPO, but IPO is very likely in the next 6-9 months.
It is a Health Care/Med Device company (CEO and design team did the DaVinci surgical robot) and will likely do pretty well on the market.
I will have 30 days to purchase these share options.
It will be a huge, if not over stretch on our finances (unless by a miracle I find a job before then).
My question is, should I attempt to acquire all of these or some fraction?
Should I offer friends or family members this opportunity?
HELP?

 

[thekunk07]

$1 a share is a lousy strike price for a privately held co. IMO

 

[ter1413]

 

[thekunk07]

if you played the popcorn card every time I taked out of ****** you'd be one of orv ille redenbacher's *****

 

[Dbear]

Don't do it.

 

[tj100]

Originally Posted by antirabbit

SO, today I was laid off.
I have approx. 30,000 options of my company shares at around $1.00 a share.
We are still Pre-IPO, but IPO is very likely in the next 6-9 months.
It is a Health Care/Med Device company (CEO and design team did the DaVinci surgical robot) and will likely do pretty well on the market.
I will have 30 days to purchase these share options.
It will be a huge, if not over stretch on our finances (unless by a miracle I find a job before then).
My question is, should I attempt to acquire all of these or some fraction?
Should I offer friends or family members this opportunity?
HELP?

Having a layoff is not a situation that many near-term pre-IPO candidates find themselves in. The market generally likes success stories, and layoffs don't usually fit into that mold.

That said, it's outright impossible to know whether this is a good deal or not without more information (total # of fully diluted shares outstanding, etc.).

 

[antirabbit]

Originally Posted by tj100

Having a layoff is not a situation that many near-term pre-IPO candidates find themselves in. The market generally likes success stories, and layoffs don't usually fit into that mold.

That said, it's outright impossible to know whether this is a good deal or not without more information (total # of fully diluted shares outstanding, etc.).

There are a total of 90 Million shares thus far, the VC's have the lions share.
The other interesting possibility would be a buy out or sale of the company to say a Phillips, GE, or the likes.
I also think Cisco is a possibility.
Anyhow.

 

[asdf]

So you have the options now? Do they roll over on IPO?

Regardless of strike price, it's usually more beneficial to hold an option till expiry than exercise early. When do these expire?

 

[Superfluous]

90 million shares at a valuation of $1B comes out to about $11/share. At a valuation of $250k, that's about $2.50 /share. What's it currently worth?

 

[Superfluous]

Originally Posted by asdf

So you have the options now? Do they roll over on IPO?

Regardless of strike price, it's usually more beneficial to hold an option till expiry than exercise early. When do these expire?

These aren't options options that you'd buy on an open market.... lol. These are most likely options that vest at a certain time and don't expire.

 

[asdf]

Originally Posted by Tony Romo

These aren't options options that you'd buy on an open market.... lol. These are most likely options that vest at a certain time and don't expire.
I didn't say you could buy them on the market, I asked when they expired. Are you even allowed to issue options with no expiry? Anyway, the missing relevant bits of information before anyone can give any advice are: 1) expiry 2) treatment on takeover or IPO 3) prospective IPO/takeover price/valuation Unless expiry is imminent or they dissappear on IPO, it's likely better to not exercise them and hold onto them instead.

 

[scientific]

yea layoffs and IPO usually do not go together. can you sell your options or shares in a private transaction, eg secondmarket, etc? or to the VCs?

 

[antirabbit]

I have 30 days to exercise them or I lose them.
I believe the private per share value is around $4.00 range.
If there is an IPO or another event like a buy out, I can sell with out restriction.
I will know more when my severence comes today.

 

[tj100]

Originally Posted by antirabbit

I have 30 days to exercise them or I lose them.
I believe the private per share value is around $4.00 range.
If there is an IPO or another event like a buy out, I can sell with out restriction.
I will know more when my severence comes today.

I'd ask (though I don't believe they have any obligation to tell you) what the strike price of the most recent options issued was, and when they were issued. Even better would be asking what the option value in the latest 123(R) report, but odds are that nobody outside the CFO/finance dept will know that. This is the best shot you're going to get at understanding the valuation of the company.

But just to ballpark it, this company is worth somewhere between zero and $11 a share ($1B enterprise value). You're best case scenario is that you come out of this with $300,000. Worst case is that you lose $30,000. My breakpoints would be something like this:

New option strike price (i.e. current value) / Outcome
<$3.00 / Walk away, maybe throw $1,000 in just on a lark
<$6.00 / Throw something comfortable in, make it your 'high risk' investment, maybe $10-$15K
~$10.00+ / Try to buy as many shares as I could possibly afford.

Pretty much the only scenario where I'd beg/borrow etc. for money to buy the options would be if the 123(R) was north of $10. That's an independent expert saying that I'm looking at a 10x return. I'd do that all day long.

All of this assumes that you're fully vested. You'll also need to play dumb on the 123(R) when it comes to tax time, because otherwise you may owe AMT on the delta between strike and FMV (though you can usually convince your accountant that the 123(R) doesn't represent a 'real' market value).

 

[NH_Clark]

Originally Posted by thekunk07

$1 a share is a lousy strike price for a privately held co. IMO

+1 .. should be in the pennies.. or in the .05 range