Dear community,
I am a former employee of one of the hottest SF Bay Area startups. i had been working for this company almost 3 years and now the time has come for me to try something new. Over the past 3 years i've vested a bunch of ISOs (employee stock options) and now i am facing a dilemma: buy them or let them expire
The problem with first option is that i simply do not have enough cash to exercise my stock options.
Recently i was contacted by one of the funds in bay Area, they basically give a cash to purchase ISOs and wait for company to exit and that's how they make profit. The good part is that if the company does not do well, they take the loss. However if the company successfully exits (IPO or acquisition) they take a big chunk of profit.
So this is not really financially interesting to me, since they basically take most of the profit.
I am a crypto-enthusiast and i though, oh, why not create tokens that would be derivatives of underlying stocks!
My idea was the following:
1. I issue ERC20 tokens on ethereum blockchain which represent the underlying stock options.
2. I sell the tokens for ether for the current fair market price.
3. i make some profit from the difference between my strike price and current market price. (it's not that much actually)
4. i pay my taxes for this profit (probably around 28% AMT)
5. We wait for company to exit.
6. When company exits, i exercise my stock, pay taxes and take 5-10% of profit.
7. I distribute the rest of profit among all token holders.
This creates a second market for ISOs. If/when the company raises another round of funding they will file the 409a valuation and the fair market price might go up.
If this happens, the token holders can resell tokens for higher price thus making profit even if the company does not exit.
This is not decentralized at all, unfortunately, as far as i know, i cannot transfer the exercised shares to other individuals. I must own them.
I am not sure how this all goes from legal point of view, maybe someone can advise?
The total value of all shares is less then $100k, which is not that much, and ideally i would find few people who are willing to invest.
This might be a great opportunity to invest your crypto into private company and you don't have to deal with taxes at all.
I am located in SF bay Area, so we can meet up and discuss everything in person. I have a deadline to exercise my ISOs though. it is August 2018, so we need to act fast
I would love to hear any feedback from the community.
Thanks
