Stock Options
Terms
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strike price
- a.k.a: grant price, exercise price
- cf.: fair market value (FMV)
- the fixed cost you'll pay per share to exercise your stock options
- the strike price stays the same!!
-
outstanding shares
- related: common stock, preferred stock and restricted stock
- company's stock currently held by all its shareholders
-
common stock
- generally issued to founders and employees
- receives a lower preference than preferred stock in the event of liquidation
- preferred shares are issued to VCs or angel investors
-
market capitalization
- (outstanding shares) x (stock price)
-
ISO (Incentive Stock Options)
- can only be issued to emplyees and not to other service providers
- usually don't have to pay taxes when you exercise ISOs
- https://carta.com/blog/what-are-incentive-stock-options/
-
related: NSO (Non-qualified Stock Option)
- No favorable tax treatment. You pay taxes when you exercise and sell them
(source: https://carta.com/blog/equity/)
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RSUs: Restricted Stock Units
- promises to give you shares on a future date, once the vesting period is over
- Why would a company want to do this?
- Typically later stage startup would do this
- The cost to exercise options (for employees) become too large
- The company wants to limit dilution
-
RSAs: Restricted Stock Awards
Questions
- Outstanding shares?
- Post-termination excersize (PTE) policy?