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[-Plasma Reus-]

So the company I work for is offering me share options.
But they've sent me a big fat document containing all sorts of legal things I have no understanding of.

How do share options work and should I take the option?
They're telling me I can buy a certain number of shares (which they have dictated) when the time comes for a fixed price (which they have quoted). That's about all I can understand from the document.

There is also a deadline, and I need to basically sign this by tomorrow.

 

[Zaraki_Kenpachi]

Those aren't options if you have to pay for them. It sounds more like an employee purchase plan.

 

[-Plasma Reus-]

okay, so is this usually a good thing to sign in to?

 

[John Dunbar]

Those aren't options if you have to pay for them. It sounds more like an employee purchase plan.

doesn't options mean exactly that? you can buy x number of shares at y price. if the y price is lower than the stock price at the time of purchase, it might be a good idea.

okay, so is this usually a good thing to sign in to?

i don't think there's really any reason not to take the options. you don't actually have to use them when the time comes.

 

[Zaraki_Kenpachi]

Let's clarify since it might be me. Do you have to pay for this option to purchase? Do they have an expiration date? All options I see from companies are given for free and have a strike price and amount you can buy at that price and an expiration date you have to use it by if you even want to. Do you have to pay for the option to potentially but them? I'm unclear from your post.

Basically, what (if anything) are you giving up to get these options? If nothing then of course you should since they're free and you could make money off of it. At worst you get nothing.

 

[Amory]

That's an employee stock purchase plan, not options.

Basically you can agree to buy shares of your company at a discounted price, usually you can finance the purchase either with cash or by taking a certain amount out of your paycheck each pay period.

It's a good way to invest if you think your company's stock is going to go up.

A word of caution though, you should check and see if you'll be taxed on the unrealized gain. My company offered an ESPP and offered shares at 20% less than the market value. I bought some. Then they hit my paycheck for a certain amount over like 6 months to cover the tax on that unrealized 20% gain.

 

[-Plasma Reus-]

Let's clarify since it might be me. Do you have to pay for this option to purchase? Do they have an expiration date? All options I see from companies are given for free and have a strike price and amount you can buy at that price and an expiration date you have to use it by if you even want to. Do you have to pay for the option to potentially but them? I'm unclear from your post.

Basically, what (if anything) are you giving up to get these options? If nothing then of course you should since they're free and you could make money off of it. At worst you get nothing.

I am not giving up anything now. I can sign for the option, and then when the time comes buy the amount of shares I have agreed I would buy.
I am not sure how they are dealing with taxes. Or how the money would be collected from me. But I assume that when I do buy the shares, I can dictate how?

 

[Amory]

I am not giving up anything now. I can sign for the option, and then when the time comes buy the amount of shares I have agreed I would buy.
I am not sure how they are dealing with taxes. Or how the money would be collected from me. But I assume that when I do buy the shares, I can dictate how?

These are probably questions you should be asking your manager or the program coordinator, since every program is different.

A lot of the time there are other rules, such as a mandatory holding period for the shares (i.e. you can't sell the shares you bought for X years).

 

[AndyD]

These are probably questions you should be asking your manager or the program coordinator, since every program is different.

A lot of the time there are other rules, such as a mandatory holding period for the shares (i.e. you can't sell the shares you bought for X years).

The other question is whether you have to buy, or may buy if you choose.

 

[-Plasma Reus-]

Looks like my options would only be 'exercised' after the company goes public or is sold. I would buy my shares at the price quoted, then sell them to the buyer.

 

[tearsintherain]

Yes sign your options, if your company gets bought or goes public you can make a lot of money.

Share options for employees usually work like this: you are given a grant of X amount of options at a strike price of Y that vest over N years. So you may be given options for 1000 shares at a strike price of 20 cents each share that vests over 4 years. That means you have the right to buy the stock at 20 cents, no matter what the current price, and you will likely get 250 options (if 1 option = 1 share, it could be 1 option = 100 shares etc) each year. So if the company gets bought for $10/share you will make $9.80/share, same with an IPO.

There are usually clauses in there too if the company is bought all your options immediately vest, and that if the company goes public you can't sell for a certain amount of time, if you quit you forfeit any unvested options, etc. If you quit you usually have to fork over a chunk of cash to convert your options to stock, or walk away from them completely.

Its very common in silicon valley, you shouldn't have to pay anything up front, you will get more options every year as part of your annual review, and if you believe in the company and aren't in debt you can also negotiate more options for lower salary. Good if you work at Google or something, bad if you work at pets.com or Zynga or something like that.

Do it, you shouldn't have to pay any money up front only when you decide to convert the options into actual shares down the road and by then you should know if they are worth anything. While the company is private you could convert the options too but generally not a good idea since there is no market so there is no body to sell the shares to.

If they are asking you to pay up front then thats a warning sign that your company may be nearly broke.

 

[-Plasma Reus-]

I've signed it.
I read through all of it and it is pretty employee friendly. The thing with legal documents is the amount of back and forth you have to do to understand what the terms mean. It takes a while when you're jumping from page 6 to 13, then back to page 4.