![]() But $1.4 million is no small difference □Įven at the cost of $1.1 million right before the IPO, that's still a 128% net return. Assuming the 409A value (also known as fair market value) is now around $15, exercising would trigger a tax bill of $246,748 for a total cost of $321,748.ĭon't get me wrong, both are AMAZING outcomes. Say two years into the job, you consider exercising. Let's ignore vesting for simplicity, and assume you're able to exercise all of your options from the get-go. Say in 2017 you join DoorDash as an engineer and get 50,000 ISOs at a $1.50 strike price. Well, the paradox of hyper-growth startups is that as the stock price goes up, exercising options becomes more expensive and unaffordable. Add in the fact that exercising stock options constitutes an investment and there's only so much advice a company can legally provide.Īnother problem is that they often don't find out until it’s too late. Often companies work hard to educate their teams, but it's a complicated system. Most startup employees don’t know the tax benefits of exercising. So – why didn’t they just exercise their stock options?! The average DoorDash employee is missing out on $924,643. So let’s use 1,032 as our upper bound on the number of stock option holders. ![]() But they stopped awarding stock options (switching to RSUs) in 2018, when they had 1,032 employees. That amount could've ended up with employees, but is now on its way to the IRS.ĭoorDash currently has 3,279 employees. If we multiply that amount by the number of unexercised stock options, there's a total of $954,231,260 in untapped tax savings. That's a tax savings of $28 per share by having exercised early.
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