One of the touted benefits of working with smaller starting companies is the stock option, in which you get a number of stocks in your company that you can buy for some fixed (and hopefully low) price. Of course, when these are given to you, they are technically worthless, because the stock is not yet traded. But when the IPO happens and the stock starts selling, it is where you can make a nice bonus for all the hard work you put in getting the company off the ground. You don’t need to buy the stocks yet anyway, you can even use some of the money that you would get from selling the stocks to buy them (so you lose a portion of your stock holding, but the rest are now trade-able and valuable).
That is the idea anyway.
Trouble comes at times like these. IPOs are not too popular at the moment and are not the big money spinners that they used to be. So going public is delayed. In addition, the economy is such that companies are having to make difficult choices to remain in business and lay-offs are common. So what happens to those lovely stock options when you are no longer part of the company?
Well, the answer is that you have to either buy those stocks or let them go, within a certain time frame. For me, it was 3 months. And you know something? Buying a commodity that might never be worth anything is not a high priority when you have only a severance package supporting you and a tough fight to find a new job. So it was with me: I had a nice little package of options, but when I was laid off, there was no immediate sign I would be able to find a job quickly. So it was with not a little regret that I let the stock options I had earned during my time there go to waste.
My experience made me realize that I had taken them for granted. I’m not one that follows the markets. I just assumed I would be able to cash in when the time came and everything would be good. I think that was the common impression of my coworkers too.
What I should have been doing is allocating some of my salary to buying the shares, in the same way that I was putting money into a 401(k). A little every pay check, nothing I’d miss – well, not too much. Then if you get laid off – or even if you decide to move on – you have put something aside that was part of your compensation for working there. If you do not do this, then you will either have a large bill to pay if you want to keep them or you’ll lose them forever.
I should add that I am not an expert on this matter – far from it. These are just my thoughts and feelings on the subject having lost my own options. I’d appreciate any comments.