Net Exercising Your Stock Options

Net exercising is essentially a  cashless exercise where you tally up the total net value of your stock options based on the number of vested shares multiplied by the spread between the current Fair Market Value (FMV) and your exercise price(s). That total value is then divided by the current FMV to determine how many shares you get. This total value is then taxable to you at ordinary income tax rates. Since your stock isn't actually liquid yet, the tax obligation from a cashless exercise can be quite burdensome.

Private companies rarely offer a cashless exercise feature because the stock options were meant to be a retention tool, but A cashless exercise makes it easy for employees to leave the companya cashless exercise makes it easy for employees to leave the company without abandoning their option grants. When they do offer it, it is usually available only after liquidity is available for the stock to address the associated taxes. If the feature isn’t explicitly listed as a feature of your option grant, then attempting to simulate it by selling shares and buying shares could cause double taxation. First you exercise the options which triggers taxes. Then you sell the shares which triggers more taxes. Whatever money is left can be used to exercise more shares that you keep. But that final exercise triggers taxes, too. This sequence of repeated taxation is usually a disaster. A much more efficient tax solution is available by obtaining non-recourse financing from the ESO Fund.

Cash for Your Escrow Payments

Do you need cash for your escrow payments? Were you a shareholder of a venture backed company and will receive future sales proceeds from an escrow release and want cash now?

We pay cash for your right to receive your escrow (future sale proceeds) payments.

Why take the risk that the escrow may never pay off or wait for years to get paid?When a company sells itself, shareholders typically receive an upfront payment and there are often future sales proceeds that are held in escrow and released in the future.

These escrow payments may never be made — they depend on whether the purchasing company has any claims against the selling company.

Why take the risk that the escrow may never pay off or wait for years to get paid, if you get anything at all. We’ll pay you cash now for your rights to the escrow payments. No strings attached. If the escrow doesn’t pay off, we take the loss.

If you want more information, email us at escrow@esofund.com and let us know:

  • The company you owned stock in
  • How much you estimate your escrow proceeds will be
  • The release dates of the escrow
  • The name of the payment agent (e.g., SRS Acquiom)