The wonders and horrors of incentive stock options
Form 83b is what startup shareholders use to not have to FMV their shares every time they buy or it vests. Many use it and what you described is not how it plays out.
I’d be really curious to read examples of how this has played out with real IPOs — whether they were highly successful and made vested employees into millionaires or not so successful.
What’s the risk to employees dishing out this kind of cash? If an IPO flops, do they lose their investment? I’d imagine it’s lower risk than buying shares on the open market because of the steep discount.
What if I don’t vest and keep options? Can’t I vest them later on as well - what do I have to lose? And I do have the option to vest later at same strike when things get more liquid, maybe when startup has grown and sites like equity zen etc can provide more liquidity.
Great explanation, CJ. Any resources you can point to that explain any write-off options in the years following the AMT charge?