Early exercised options, then company folded before full vesting. What next?

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blueclamp
Posts: 1
Joined: Thu Mar 21, 2019 6:25 pm

Early exercised options, then company folded before full vesting. What next?

Post by blueclamp » Thu Mar 21, 2019 6:43 pm

Hi all,

The company I work for recently folded. I have stock options in the company (worth $0!), of which I am ~75% vested. I early exercised those options, and paid for all of them before I had actually vested. For the sake of argument, lets say I paid $1000 for those stocks. Now that the company has folded, I believe 75% of that $1000 may be declared a loss. What about the other 25% that I had not vested? Should I request the company pay me that hypothetical $250 back? Or can I consider that a loss too? Even though they were aimed at buying 25% of the stocks that never vested.

Please forgive me if I have some of the verbs or verb tenses incorrect around having actually bought those options, or having promised to exercise those options. I get confused around these things.

Thanks ahead of time for thoughts. This forum is just great.

Skiandswim
Posts: 119
Joined: Tue Dec 21, 2010 3:24 pm

Re: Early exercised options, then company folded before full vesting. What next?

Post by Skiandswim » Fri Mar 22, 2019 4:50 am

Each company has a different plan when it comes to employee stock options. It is important to fully understand the stock options plan requirements to understand how your purchase was handled. It is unusual for a company to allow you to purchase options that are not vested. The firm should have provided you with stock accounting, such as certificates numbers (electronic or paper) for the shares purchased. This might help you define how to treat the loss.

Claiming a tax loss for "folded" company can be tricky. You can wait and claim a capital loss deduction after your shares have become wholly worthless. (Under the Tax Code, you get no deduction for partial worthlessness. Share might be still trading as penny stocks on some exchange). Bankruptcy may not trigger worthlessness.

Simplest way to claim loss, you can try to sell the shares you believe are worthless (any small value ... $0.01) while they are still listed on an exchange (NYSE, NASDAQ, etc).

toast0
Posts: 104
Joined: Fri Dec 12, 2014 1:41 am
Location: San Francisco Bay Area

Re: Early exercised options, then company folded before full vesting. What next?

Post by toast0 » Sat Mar 23, 2019 11:26 pm

I'm assuming since the company has shutdown, you're no longer an employee. If you have your stock plan paperwork, check what it says about termination of employment. In my early exercise case, the company had the option to buy back unvested shares at the exercise price for something like 30 days after separation; and if they didn't, the shares would be mine to keep. If you're still in touch with the officers of the company, I'd certainly ask them to buy back the unvested shares, but they probably don't have an obligation to.

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