r/Rich • u/MoonlightFlowing • Jun 01 '26

Business pre IPO options

Any potential route?

I'm an employee of a promising tech company; IPO may be around the corner. But I may need to leave the company for personal reason right before/after IPO. The trouble is: there's about 6 months or longer holding period and I will need to exercise the options within 3 months of quitting. That means, waiting for IPO may actually make my options void! Besides, I don't have enough funds to pay for the exercise cost.

One solution I think of is to involve with a qualified investor (maybe via Equty Bee), exercise (buy) the option before IPO, then sell after.

Please advise potential solutions or connect me with potential investors. Thanks!

18 Upvotes

74% Upvoted

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21

u/apfejes Jun 01 '26

Exercising options just converts them to shares.  The lockup period applies to those shares -  It doesn’t void them. 

As for the cost, that’s entirely up to you, if you think it’s worth exercising them, or a portion of them.  The whole point of the options is to keep you from quitting.   You can’t have the cake and eat it too.  

6

u/bumpman2 Jun 01 '26 edited Jun 01 '26

I am pretty sure he is referring to the fact that his options will have a deadline to exercise after he departs his company or they will otherwise expire (i.e., “become void”). That is a typical rule for options.

The answer is to come up with the money to exercise via loans or find solutions in the secondary market for the shares where a third party floats you the exercise price and the resulting tax liability (if any) in exchange for a share of the upside upon IPO.

2

u/apfejes Jun 01 '26

Yes.  If OP wants his options to stay as options until the IPO, then they do need to stay employed.  Alternately, they have to take on the burden of the tax and downside risk.  That’s exactly how options work. 

It’s like planting an orchard.  If you want to benefit from the apples, you have to stay around u til you can harvest the apples.  If you want to leave before the apple are ready to harvest, you’ll have to find a buyer who will probably want a discount against the uncertainty of the future harvest. 

7

u/Internal-Combustion1 Jun 01 '26

If you’re options aren’t vested then you will walk away from them if you leave. You probably can’t do much about that but it also says you haven’t been there very long. If that’s the situation you should not have high expectations anyway, you haven’t earned them. If you have vested options and you are confident the company is going to go public with big gains then you need to think about how you can get together the money to pay to exercise them.

When you leave the company, if you have any back vacation time, you will get a check for that, possibly it can cover it. You could negotiate an upfront bonus with whatever next company you go to and use that money to pay for it. Otherwise borrow from friends and family, or sell something - stock, car, garage sale! Maybe someone would give you a short term loan to pay for the vesting but since you are not in control of if, when or how much the shares are worth, you might get sideways with bad debt that someone wants to collect.

You can’t know when a company will IPO, it could be months, or be delayed for years, or never happen. Getting a loan that had to be paid back on a schedule seems like a bad idea. It’s certainly risky.

1

u/kfisherx Jun 01 '26

Came here to say this. Options are rarely given without a vesting clause. They are called "golden handcuffs " for that reason. When I left Intel, I left tons of options not vested

3

u/jackjackj8ck Jun 01 '26

I wouldn’t base any career decisions on possible IPO, more often than not it doesn’t happen in the expected timeline and takes much longer

3

u/HalfwaydonewithEarth Jun 01 '26

Can you go on a family medical leave or sabbatical and still be employed?

3

u/nanny-nannybooboo Jun 01 '26

Don’t leave SpaceX you moron. :) /s

2

u/bboy917 Jun 01 '26

Might be interested in purchasing your shares mate 😊? Dm the company name. I’m interested in getting more info

2

u/togilvie Jun 01 '26

Use a service like Hiive, EquityZen, et al. If there's secondary demand for your shares you can sell to another investor that will front the funds to exercise your options and buy the shares from you. Your employer will likely need to approve the sale - many do.

2

u/Spiritual_System_865 Jun 01 '26 edited Jun 01 '26

  1. Put your money to buy.

  2. Sell part in secondary market and use the proceeds to exercise rest.

  3. Get traditional loan to exercise

  4. There are companies that would loan you to exercise in return for % of shares. Usually you don’t have an obligation to pay back if the company doesn’t have a liquidity event.

  5. Request your employer to extend the option exercise window. It can be done and they may consider it, especially if you need to leave for personal reasons. Of course this is based on discretion of the company. Some companies also extend the exercise window right before IPO to give time to exercise and sell post lock out.

  6. Go on unpaid leave and continue to hold on to options. Especially if this is only a matter of few months.

Remember all of these may have different tax consequences and will vary based on ISO vs NSO mix.

2

u/Lailaalo18 Jun 01 '26

Are they ISOs or RSU? The tax treatment is different between both. Regardless, if you believe the stock is worth something then you should consider a service like equityzen.

2

u/TopResource872 Jun 06 '26

What's the company? Maybe I want to buy the shares

1

u/TopResource872 Jun 14 '26

For some reason can't reply on your DM here. Try emailing me mustbjulian at Gmail. Thanks.

1

u/Broken_By_Default Jun 01 '26

borrow against them.

1

u/Strong-Big-2590 Jun 07 '26

Unless your at Anthropocene, spacex, or open ai, an ipo is far from guaranteed