Employee
Stock
Option
Fund (ESO)
We know the dilemma from firsthand experience: should you exercise your stock options, or should you let the options expire? Can you afford to tie up substantial amounts of money in an illiquid stock for a long period of time? The high failure rate of startups makes the decision even harder, especially with extra costs such as the Alternative Minimum Tax (AMT).
The Employee Stock Option Fund provides current and former employees of venture backed companies with the cash needed to exercise their options and cover associated taxes. By partnering with ESO, the employee retains potential upside. If the company goes under and the shares are worthless, ESO bears the risk and not the employee.
In other words, you can have your cake and eat it too. If you represent company management and facing the dilemma of whether to change your entire option program to NSOs or RSUs, letting ESO selectively address individual situations for you is a lot less expensive to the company than letting 100% of the departing employees capture equity without investing a penny.
Why should you consider exercising your options?
For every private company that IPOs or gets acquired, many more are liquidated and the people who own common stock or exercised options can lose 100% of their investment.
If you partner with ESO on the shares you already own, we’ll cover your the investment you’ve already made in exercise cost and taxes. No payments are due unless there is a major liquidity event, such as a sale or IPO. If the stock becomes valueless, ESO takes the loss.
The Alternative Minimum Tax (AMT) can impact you if the fair market value of your incentive stock options (ISOs) is higher than your exercise price.
Since the cost of exercising options can be quite high, a large tax bill just makes the process more burdensome and risky. ESO Fund can help you cover the potential tax bill as well.
Does this sound familiar? You wait years for your stock to vest and when it finally does, a delayed IPO or merger prevents you from hitting the road.
It takes eight years for the average company to IPO these days. During that time, it’s tough to extract value from your frozen options or illiquid stock. The ESO Fund allows you to keep your cash free for other needs.
