IPOs are being pushed further into the future during a challenging market environment. If your equity is a major piece of your compensation then you should have access to it when life circumstances call for it. As a leader in private market transactions, Forge helps you find liquidity when you need it.
We’ll help you understand the market for your shares. And when you’re ready to buy a house, pay for college, or want to diversify your finances, Forge can help you sell your stock in a way that works for you and your company.
We leverage our extensive network of over 125,000 accredited investors and institutions to find a buyer for your private company stock. Forge has matched buyers and sellers for over $12 billion in private stock transactions as of March 2022.
Forge has worked with 500+ private companies and thousands of employees, helping them sell their private stock. Your private market specialist works with you at every step of the way to help you manage this important life event.
Equity shouldn’t be an all-or-nothing part of your compensation. Diversify your personal finances by working with Forge. You can diversify your personal finances by taking some or all of your equity off the table to pay for the things that matter in your life –whether that’s a new house, your child’s education, or taking care of family members.
Create a free Forge account and explore selling your shares.
Easily indicate your interest to sell, target price and number of shares.
Forge then leverages its platform of 125,000 accredited investors and institutions to source potential buyers.
Forge’s legal, compliance, and operations teams work with you to close your transaction.
Understand key elements of your startup equity and selling pre-IPO shares
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.
Selling your shares is a four-step process.
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.
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.
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.
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.
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.
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.
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.
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.
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.
A stock option is exercised when you pay the exercise (or grant) price to receive the shares.
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.
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.
Exercising options is a personal investment decision. Employees who want to sell their shares with Forge, however, must exercise their options.
Your exercise price is the price per share you must pay to purchase your shares.
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.
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.
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.
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.
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.
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.
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.
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.
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
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
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
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
Smallest whole piece of a company an individual investor can own; a unit of ownership (e.g. 50 shares)
Represent shares of ownership in individual companies; a measurement of equity (e.g. own 5% of the company)
Stock of a company that is not fully transferable until certain conditions have been met; when conditions are met, the stock is no longer restricted and becomes transferable to the person holding the award
Contracts with other investors that let you bet on which direction you think a stock price is headed
Period of time over which a stock award is earned
These are earned options
These are unearned options
This is the very first point you earn the first of your options
Purchasing the options
Price at which an employee is eligible to purchase shares once options are vested
The window of time in which employees are not allowed to redeem or sell shares
The price per share of the stock at a given time
Corporate benefit that gives an employee the right to buy shares of company stock at a discounted price with the added benefit of possible tax breaks on the profit
Employee compensation offered by employers wherein the option holder pays ordinary income tax on the profit made when they exercise the shares
Right to purchase a company's stock at a specific price and at a specific date
Occurs when an employer pays a part or all of the compensation of an employee in the form of corporate stock