Ask HN: Exercising stock options with imminent new round of funding (AMT panic)
I am likely looking to leave (within the next few weeks) the startup I am currently working for, and go to one of the top 4 for several reasons.
(Un)fortunately, the startup appreciated considerably since I joined 3 years ago, and now the cost of exercising my option + AMT tax would be around ~110k (I calculated the value manually and also used TurboTax to simulate the transaction, it turns out ~40k for exercising + ~70k for AMT).
Now, on top of this insane amount of money that I have to pay out of pocket, there is even a bigger problem: The math I've done for the taxes is based on the 409A valuation of the company done at the last round of funding (Series B) a year ago (it's still the official number HR provided me). I have reasons to believe a Series C will be imminent (i.e. a month or two away).
The question I have is: if I leave, say, two weeks from now, and write a check for $40k to the HR department for exercising my vested options, can I use the check date as "exercise" date, meaning that I'll be sure the valuation for AMT purposes will still be the one of the Series B? Or will I have to wait until the board & lawyers approve the whole thing, which could mean the FMV will likely have increased by then because of the Series C (and I will be effectively screwed, because the AMT tax portion would be much larger?).
In other words, would this timeline work?
- (April 2017) I leave the company and pay $40k for exercising
- (May 2017) The company raises the Series C, increasing its value
- (June/July 2017) Lawyers/board process my exercise and send me the certificate saying I am a stock owner
- (at some point between August 2017 and April 2018) I pay $70k to IRS, even if the FMV is increased
Thank you