Private Shares - Should I sell in Secondary Market?
I worked for a unicorn in Bay Area and quit after 3 years. Exercised all my vested stock options. It has only been 3 months but I am now getting a secondary market offer to sell it at an attractive price that would get me ($550k minus taxes). However, I will be hit with short-term gain. While I believe in the long-term vision and growth of the company, The options value has already exceeded my expectations from 3 years ago when I joined the company and Other public companies in the sector are getting hammered and I am not very positive about the overall market outlook for 2022. Hence I am considering selling but the short-term gain tax concerns me. The tax will be due in April 2023 ofc and I have a ~50k loss carryover on my tax returns from some degen trading in 2019-2020. What will I do with the money if I sell? - No Degen trading, no margin, no options - Clear all my debts (~50k) - I will probably stake 25% of it in USDC, USDT (crypto) for a fixed 8% return - Park rest in Vanguard (not all at once) - Buy a house in Bay Area (not in a rush) Any advice is appreciated. TC: 250k YOE: 8 #investments #startups #options #secondarymarket
Couple of huge incorrect tax related assumptions: 1. Your are due taxes at the end of quarter when you make sudden huge profit. General rule is you have to pay sooner if you are going to end up paying less than 90% of your expected tax. Otherwise there is a penalty. 2. You can carry over only 3K loss onto next year from your last years trading shenanigans.
Thanks for replying. I was not aware of point #1. I will read more into it. Re: #2 My understanding is if I have a 50k loss carryover and then make a 100k gain. They cancel each other out and I am left with a 50k gain. I am then taxed on the 50k gain. Is this not correct? Quoting Investopedia: "What Is a Tax Loss Carryforward? A tax loss carryforward (or carryover) is a provision that allows a taxpayer to move a tax loss to future years to offset a profit."
That is correct
Why not split the difference? If this company’s value will 5x, then sell 80% now and wait for the remaining 20% to become the next 550k? Get the best of both worlds
I wanted to sell a smaller chunk but the secondary market offer has a minimum transaction value condition of 500k so I will need to sell more than 80% (I wanted to sell just 20% now initially) Also, In no world do I see the stock going 5x from here. The best-case scenario is 2x from here in 5years. It took the company 10 years to get to 3B. so If I sell ~80-90% now, I may be left with a chunk that does not appreciate much + disables me from selling in the secondary market as I will not meet the minimum threshold.. so If selling, I am considering ALL for now.