Unlock more possibilities

Question 1

Can you sell your private company stock?

Answer

Yes, selling your private company stock is possible. However, your ability to do so is contingent on your company's specific policy regarding the sale of private stock, as well as finding an interested buyer for your shares who qualifies as an "accredited investor" as defined by FINRA and the SEC.

Some companies may allow vested share sales, while others may have restrictions or set specific times for selling. While companies understand their employees' needs for liquidity, such sales could affect the company's valuation and capitalization table. Therefore, any sale of private company shares typically requires approval from the company.

Question 2

Can you sell your pre-IPO shares on your own?

Answer

Yes, selling your pre-IPO shares on your own is possible, but it requires finding an accredited investor and obtaining your company's approval. The process involves negotiating terms, handling paperwork, and coordinating with a transfer agent. Although challenging and time-consuming, it is possible to manage the sale yourself.

Additionally, some companies offer share buyback programs or tender offers, providing a structured way to sell shares. These events aren't guaranteed and come with set eligibility criteria and non-negotiable prices. It's crucial to recognize that these company-led sales might not align with your personal financial goals.

Question 3

Selling your private company shares on a secondary marketplace

Answer

To sell your private company shares on Forge’s secondary marketplace, you will need to register and provide details about your shares including your desired sale price. Forge aims to match you with a buyer, but the final price is subject to supply and demand, and a sale is not guaranteed.

Once a buyer is found, Forge assists with documentation and seeks company approval for the transaction, which can take 30-60 days and incurs a service fee of about 5% of the sale price. Forge provides broker support throughout the process to align the sale with your financial goals.

Question 4

Things to consider before selling pre-IPO shares

Answer

Before selling pre-IPO shares, you will be required to secure your company's approval and understand its stock sale policies. Check for any holding period requirements or secondary sale restrictions.

You should be aware of potential tax liabilities and strategize the timing of your sale to align with your personal financial goals. Consider whether waiting could affect share value and ensure the decision you make fits your risk comfort level. Remember, platforms like Forge may facilitate finding buyers, but prices and sales are not guaranteed and are subject to company constraints and approval processes.

Question 5

Can you sell your private company stock?

Question 6

Can you sell your pre-IPO shares on your own?

Question 7

Selling your private company shares on a secondary marketplace

Question 8

Things to consider before selling pre-IPO shares

Question 9

What is Forge?

Answer

Forge works to help startup employees sell their vested shares so they can pursue their personal and financial goals.

As an employee at a fast-growing technology company, a large percentage of your compensation may be paid in equity, or stock in the company. Typically, you earn this stock over many years, and the amount may be refreshed throughout your career.

Today, the average startup stays private for 11 years before IPO. That means that it may be as long as 11 years before you can easily sell your shares through a traditional stock transaction.*

As a shareholder and an employee, you may want to convert some of that stock into cash to fund something else in your life, like a house. Or as a way to diversify your financial profile.

That’s where Forge comes in. Forge works to help you sell your shares so that you can use the money however you see fit.

*Jay R. Ritter, University of Florida, 6/17/2022

Question 10

How do I get started?

Answer

Selling your shares is a four-step process.

Register online with Forge. This process is free and takes just a few minutes.
Enter the name of the private company whose shares you wish to sell, number of shares you’d like to sell, and your asking price per share. A Forge Private Market Specialist will be in touch to share insight into the market for your shares, so it’s ok if you don’t have a price in mind just yet. This information will not be shared with your company.
Forge records your interest and reaches out to its network of approximately 125,000 accredited investors and institutions to source possible buyers.
If there is buyer interest in your block of shares, a Forge Private Market Specialist will reach out to you to help facilitate the terms and a final purchase price. Once the terms are set, Forge works to close your transaction.

Question 11

How do I value my private company shares?

Answer

Unlike public companies, startups and private companies trade less frequently and are not required to make financial disclosures to the general public. As a result, private company stock prices do not update as frequently.

Forge has completed over 16,000 private market transactions in more than 450 private companies and has a proprietary platform of trading and valuation data that is used to help price your shares. In addition, Forge Private Market Specialists are experienced in facilitating private market transactions. They can share their market insight and bring together all available information to assist you in determining the value of your shares.

Question 12

Will my company approve the sale of my shares?

Answer

Generally, startups and private companies (sometimes referred to as “issuers”) are supportive of their shareholders selling shares so they have cash for family and personal needs. Private companies often have different procedures in place to manage stock transfers. Your Forge Private Market Specialist will help you navigate your interactions with the company and its preferred transaction process.

Question 13

What is Forge’s minimum transaction amount?

Answer

Our standard minimum transaction size is $100,000 USD; however, there may be opportunities to sell a smaller amount. Your Forge Private Market Specialist can discuss transaction sizes with you.

Question 14

Does Forge charge a fee?

Answer

Forge supports multiple structures for private market investments and so fees vary. Typically, Forge’s commission is 5%. Participants may pay a higher commission if the total dollar amount of the transaction is less than our minimum transaction amount of $100,000.

Question 15

How long will it take to sell my shares?

Answer

On average, a transaction may take 50 days from the time Forge matches a buyer and a seller. Forge keeps you apprised of the timelines and next steps, every step along the way.

Question 16

What is the difference between shares and options?

Answer

A stock option is the right – but not the obligation – to purchase company stock at a fixed price, known as the exercise price (or grant price), within a set period of time. Options are granted to employees as part of an Employee Stock Option Plan. Options provide you with the right to purchase actual shares of company stock and become a shareholder sometime in the future. As a shareholder, you may have voting rights and can potentially receive dividends. Option holders do not have those rights until they exercise their options and purchase shares.

Question 17

What is vesting?

Answer

Vesting is the process by which you earn the right to exercise the options in your Employee Stock Option Plan. In your stock option plan, there is a vesting schedule that details when and how your options "vest" or become available to exercise. Typically for a new employee, options vest over a four-year period with 25% becoming available to exercise on the first anniversary of the option grant. After the first year, it's common for option to vest on a monthly basis. However, option plans vary widely and it's important to read the details of your plan.

Question 18

Do my options expire?

Answer

Yes, options expire – timing varies, and you should refer to information provided by the company that granted the options. Option holders can exercise the option and realize profits or losses, or if they let the expiration date pass, the options cease to exist.

Question 19

What happens to my options if I leave my company?

Answer

Your expiration date may change if your employment status changes, and if you leave your company voluntarily, you may have up to 90 days from your termination date to exercise your vested options. This varies and should be confirmed with your employer.

Question 20

How do I exercise my shares?

Answer

A stock option is exercised when you pay the exercise (or grant) price to receive the shares.

Question 21

What is the Forge Options Exercise Bridge Loan?

Answer

It can be difficult to come up with the funds needed to exercise your vested, private company stock options, and Forge believes that option holders should have the ability to acquire and sell the equity they have earned. Forge Lending LLC offers employees an Options Exercise Bridge Loan that can provide you with the funds needed to exercise options and sell the resulting stock without incurring a significant upfront cash expense. Learn more here.

Question 22

What is Fair Market Value?

Answer

Fair Market Value (FMV) is the valued price per share of the stock; FMV is important for tax calculation purposes (at time of exercise and/or at time of sale depending on the type of stock options granted). A stock option may be worth exercising if the FMV of the underlying common stock is more than the grant price. For private companies, it is typically based on the company’s valuation. For public companies, it is based on the price the stock is trading on the stock market that day.

Question 23

Do I have to exercise my options?

Answer

Exercising options is a personal investment decision. Employees who want to sell their shares with Forge, however, must exercise their options.

Question 24

What is my exercise price?

Answer

Your exercise price is the price per share you must pay to purchase your shares.

Question 25

What is “early exercise”?

Answer

Early exercise is when you choose to exercise your stock options before they have vested. This can be a way to minimize your tax liability and increase potential gains depending on the Fair Market Value of your company and your exercise price. Some option holders choose to early exercise so that when the options vest, they already hold the shares. This can be tax advantageous to start the long-term capital gains clock ticking. It's important to point out that not all stock plans or companies offer early exercise.

Question 26

What is a “cashless exercise”?

Answer

A cashless exercise is when you exercise your options and then immediately sell the resulting shares. With a cashless exercise, you cover the expense of exercising the options with the sale proceeds. This is sometimes referred to as a same-day sale. Again, not all stock plans/companies offer this option.

Question 27

Can I exercise options before they vest?

Answer

If your options aren't vested, employers typically won't allow you to exercise them until a certain period of time passes, which tends to range from 3-5 years. This varies and should be confirmed with your employer.

Question 28

How is an exercise price determined?

Answer

The exercise price (or grant price) is the amount you pay to the company for each share, set by the company at the time the stock option grant is made.

Question 29

What is the difference between exercise price, grant price and strike price?

Answer

These terms are used interchangeably; it's the price at which an underlying security can be purchased when exercising the right to buy that security which the option gives you.

Question 30

Will my exercise price change?

Answer

The exercise price does not change. This means that if the value of the stock goes up, you have the opportunity to purchase a stock below Fair Market Value (FMV) and potentially profit the difference of your exercise price and the current FMV.

Question 31

Difference between common and preferred stock?

Answer

Common stock is typically issued to founders and early employees of a private company. The private company usually offers employees a stock plan that allows them to purchase common shares at a specified exercise price. Preferred shares are usually issued to investors and institutions when they participate in a primary funding round. Preferred shares typically come with certain rights and privileges that give them priority over common shares in the event of an acquisition, liquidation or bankruptcy.

Question 32

What are the tax implications of exercising?

Answer

Based on the type of stock option you’ve been granted (Non-Qualified Stock Options vs. Incentive Stock Options), you may owe taxes at exercise and sale or only at sale. Talk to a tax advisor about your total tax liability to avoid any unexpected surprises at the end of the year.

Question 33

What’s the difference between personal income tax and capital gains tax?

Answer

Income tax is paid on earnings from employment, interest, dividends, royalties, or self-employment, whether it’s in the form of services, money, or property. Capital gains tax is paid on income that derives from the sale or exchange of an asset, such as a stock or property that’s categorized as a capital asset.¹

1. Investopedia

Question 34

What is the 83b form?

Answer

The 83(b) election is a provision under the Internal Revenue Code (IRC) that gives an employee, or startup founder, the option to pay taxes on the total fair market value of restricted stock at the time of granting. The 83(b) election applies to equity that is subject to vesting and alerts the Internal Revenue Service (IRS) to tax the elector for the ownership at the time of granting, rather than at the time of stock vesting.¹

1. Investopedia

Question 35

What is a 409a valuation?

Answer

Private companies that want to issue shares to their workers must be appraised because, unlike public companies, there are no share prices available to view at any time. This is called a 409a valuation – an appraisal of a private company’s stock in preparation for issuing shares to workers. 409a valuations should be made every 12 months or at every round of funding.¹

1. The Balance

Question 36

What is a RSU and difference between stock option?

Answer

Stock options allow you to purchase shares in your company’s stocks at a predetermined price (i.e. strike price) for a limited number of years. Employers encourage employees to stay longer because there’s typically a vesting period before the options become exercisable. This means that you have to be employed for a certain amount of time before you can actually exercise (or buy) the stock you were granted.

Restricted stock units (RSUs) are the most common type of equity compensation and are typically offered after a private company goes public or reaches a more stable valuation. Like stock options, RSUs vest over time, but unlike stock options, you don’t have to buy them. As soon as they vest, they are no longer restricted and are treated exactly the same as if you had bought your company’s shares in the open market.¹

1. HBR

Answer 5