stock-options, stock, private-companyI would like to know what are the considerations for buying vested stock options of a privately owned company that still hasn’t IPOed. I was told that the company’s rules are that once the options have vested, they can be bought/sold among employees, or even bought by outsiders.
I would like to know if this is buying/selling of vested options is doable or if there are any caveats?
The most usual warning is that there is no guarantee of an active market. You risk owning an asset which is potentially valuable, but no-one particularly wants to buy (unless you wait a long time). Like stocks where the traded volume is small, but much worse.
Typically startups don’t allow transferring (buy/selling) stock options and shares. Stock options are usually non-transferrable. As Loki mentioned, for shares the company usually has a right of first refusal (ROFR) clause and would buy the shares back. Look in your Stock Option Plan (or Equity Incentive Plan) and Stock Option Agreement. Those two documents contain the rules regarding your options and shares.
The secondary market of private shares is usually limited to the very famous companies. If your company is hot/exciting (Uber, Airbnb, etc.), there are lots of secondary buyers who are interested. If not, it may be very hard to find a buyer.
A company can impose rules on the buying and selling of their shares.
A relatively common one is that the company has right of first refusal. This means if you get an offer for your shares the company has the right to buy them first (at the price that you got the offer for) if they don’t bye them the your original customer gets to buy them.
All details should be available in the documentation you signed when getting your stock (or your options).
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