Uncertain times are ahead for tech workers as we approach the end of 2022. Already this year, the tech industry has laid off more than 120,000 workers, a record-breaking trend that doesn’t seem to be slowing.
This is undoubtedly the result of the economic slowdown and uncertainty. Regardless of the specific causes, thousands of employees of public and private tech firms who are already in the midst of layoffs may be faced with important investment decisions. What to do with their stock options? The answer is - it depends. There are many factors to consider.
Let’s examine their options, risks, protections if they have any, and what their companies may do to inform them as they make their choices. We will focus on privately held firms. Many tech firms are staying private longer and their employees cannot easily determine the value of their options or decide whether to exercise or not.
Employees are also investors in their companies and as investors they need to make investment decisions without much information on the value of their options or the future viability of the firm.
If they decide to exercise, they may pay taxes on profits that may never materialize. They cannot exit, sell or transfer their stock easily if they decide to exercise. Due to our securities law, there are probably restrictions associated with private stock issuances. Some employees may lose their options completely.
Unlike sophisticated investors, employees are usually common...
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