

Ask HN: Startup employee: sell vested options to angel investor - xbeta

Hello all,<p>I am working at a tech startup and have some portion of vested options that belong to me.  I recently have some financial difficulties and would like to know if I can trade my vested option in a secondary market or something to some angel investors who are also interested in my current company.  The extra bit of cash might help me in the next few months and would like to know how I can establish that.  Any advice?
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tptacek
Probably not. Your employee stock agreement probably requires company approval
for transfers, and unless you're at a large company that already has a liquid
market for its equity, that approval will not be granted.

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staunch
Have provisions like that been held up in court? It seems to go against the
strong stockholder laws in Delaware. Not being able to sell your shares is
probably the most important right there is.

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tptacek
Yes. Control and transferability restrictions are basic corporate governance.

We're talking about private companies, not public ones. Easy liquidity is
_not_ an important feature of closely-held private company stock.

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ChrisCinelli
Before you exercise, make sure you are familiar with the Alternative Minimal
Tax and how exercising Stock Options affect it. See
[https://www.wework.com/magazine/knowledge/startup-equity-
und...](https://www.wework.com/magazine/knowledge/startup-equity-understand-
amt-exercising-options/) and [https://gigaom.com/2011/06/05/5-mistakes-you-
cant-afford-to-...](https://gigaom.com/2011/06/05/5-mistakes-you-cant-afford-
to-make-with-stock-options/) (especially the David Weekly at the bottom). Some
people went bankrupt for that. Also check the rules on ISO (I supposed you
have ISO options).

Then I think the best you can do is to sell the right to own the stocks when
you will be able to sell them according to your stock plan. In practice you
cannot sell the stock now but you can have a contract with a person that you
will sell them as soon as you can. Or something like that...

On how to find somebody willing to buy them, I am not sure. Common stocks are
considered almost worthless by a lot of investors. There are also some
information about preference in round of funding etc, that a sophisticated
investor would like to know but it is not always public knowledge outside of
the board.

Before Facebook IPO I know SecondMarket was the place. I am actually curious
about the options here.

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ekanes
Consider talking to the company about it. If they're doing well, (and aren't
concerned you might leave) they might be interested in buying the options
back.

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brudgers
Read your purchase agreement, employment contract, articles of incorporation,
buy/sell agreement etc. It is common for the circumstances for the transfer of
shares to be established to handle this sort of situation because founders
don't want just anyone owning shares. If something is unclear, consult an
attorney.

One common way of handling these situations is for the founders or the company
or other employees to purchase the shares. A loan with the shares as
collateral is another possibility.

Keep in mind that selling shares may be viewed as a lack of faith in the
company [likewise if the founders are not interested in reacquiring your
shares.

Good luck.

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djb_hackernews
If the company is doing well enough that outside parties would be interested
in getting in in such an unusual way maybe it is time to ask for a raise?

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debacle
While you likely can't transfer ownership of your shares, you can take a loan
out on the sell value of those shares at some predetermined later date. The
legalities are somewhat sticky, but it is possible.

