Ipo stock options tax dubai
This is a fantastic chunk of money. I highly recommend this Quora post and this Wealthfront post for further reading. Acquisitions are a hot way to cash out in the valley, these days. Acquisitions of small startups generally serve several purposes. Additionally, if a startup is competing with a larger company, the company might choose to purchase the startup as a way to protect itself e. Lastly, and most cynically, an acquisition can be used as a way for VCs to cash themselves out without losing all of their money.
I should note, however, that not all acquihires are favorable to VCs. One other thing to look out for, especially if you work at a startup, is the fact that VCs get preferred shares. Essentially, this means that they get paid in full, before anyone else.
In cases where the startup is failing, and likely sells for about what it was valued at when raising capital, this means the employees walk away with almost nothing.
What I mean by this is, when a company raises a round of funding, they sell shares to investors at a given price.
The price per share determines the value of the company at that point in time. More reading here , here , and here. I highly recommend the last one, which is a paper from some professors, examining the practice of acquihiring.
Another way that an employee might reach liquidity with regards to his or her shares is when the company that they work for has a public offering of their shares. A company that wishes to sell some of their shares on the public market must file an S-1 form with the SEC. These forms tend to follow a fairly standard layout, though they typically contain cover letters and some freedom to write in plain english.
Here are some examples:. If you work for a company that IPOs, you should get familiar with these documents. All the typical reasons that you can imagine a company might need a chunk of cash. After the S-1 is filed, the company enters a quiet period. During this time, changes to the S-1 will be filed based on new information that might come available , and employees are required to say absolutely nothing about the company, the filing, etc.
Any information that leaks out and is not in the S-1 can result in a lot of bad things happening including firing employees that leaked the information, delaying the IPO , etc. The idea, here, is to make it so that everyone, publicly, has the same amount of information available to prevent insider trading.
Usually, this is a result of increased demand from the market makers, but it also serves the purpose of building hype. When a company has an IPO , there is typically a period where employees are unable to exercise or trade the shares that they own. This period typically lasts between three and six months from the IPO date.
The motivation for this is to provide price stability, and prevent shares from flooding the market too quickly. This means, when a company like Facebook goes public, the employees are not selling their shares immediately, and have no more money in their bank account the day after the IPO than they did the day before. One exception to this rule is that some companies will offer their employees the chance to participate in the offering, itself, even though they are locked up. In this scenario, employees might be given the chance to sell some percentage of shares on the day of the IPO.
The caveat here is that the employees will not be selling their shares on the open market. They will be selling them to Wall Street market makers at a reduced price compared to the opening. Sometimes, a company that has gone public will file for a secondary offering. This is, essentially, the opportunity for the company to sell more of its shares on the open market. There are generally two reasons that a company might want to do this:. When a lockup-period expires, a flood of shares that have been illiquid will suddenly become liquid.
In the case of Facebook, for instance, million new shares will become available on the market in a single day. On average, 46 million shares of Facebook are traded per day.
You can bet that the lockup expiration will have an affect on the share price that day. To prevent all shares from flooding the market at once, a company can get some of its institutional investors to participate in a secondary offering. In this case, the company and its institutional investors will agree to sell some of their shares to investment bankers at a slight discount to the current market price. These bankers will then be locked up for a further period of time but get a discount off the current market value.
If you compound this with the initial lockup, it means that the company can stage dumping of its shares across a longer timespan IPO , lock-up expiration, secondary offering , which increases the stability of the stock. One way to get around this is to fill out a 10b form. This is an SEC form that allows you to set up a pre-made schedule that can execute during blackout periods.
You can generally set up pretty sophisticated rules, and work with the broker that your company uses e. E-Trade, Schwab, etc to get your 10b in place. To sell IPO shares, a company typically employs underwriters. Underwriters are basically a group of banks that buy the pre- IPO shares from the company, and then turn around and sell them on the public market. This has a number of cushy side effects. Second, underwriters typically provide pre- IPO shares to some of their important investors.
Basically, this tends to be free money if the IPO has a bump in price on opening day for people who are generally pretty wealthy already when was the last time your bank called you to offer you an opportunity in pre- IPO shares?
Facebook and Google are both interesting cases in this area. Similarly, because of demand from banks, Facebook was able to play hardball, and threaten to dutch auction, if they did not get their shares underwritten at a much lower percentage. I believe the number that I heard was 1. There is intimidation or misinformation about listing requirements or regulations; or an unfamiliarity of just what the exchange can offer in terms of investor base, particularly when it comes to the energy sector.
However, a closer look shows that there are many benefits to listing on the NYSE, some of which might even outweigh the perceived challenges. From a wider perspective, the branding and credibility of the NYSE are arguably unrivalled.
The advantages of the acquisition currency in US dollars are numerous, and the listing provides a ready platform for strategic expansion into the US. FPIs are required to file an annual report with audited financial statements, but otherwise are only required to provide semi-annual unaudited financial information, which need not be reconciled to US GAAP. Additionally, they do not need to receive shareholder approval for equity compensation or other stock issuances.
Additionally, the GCC company would have to meet one of two financial tests, either: The benefits of listing on the NYSE must be balanced against the vigorous disclosure and compliance requirements of the United States.
There are other challenges to GCC businesses. While many of them are working hard to develop their corporate governance and disclosure practices, there is still much work to be done. Moreover, the amount of resources and time needed for shareholders is steadily increasing in the US, as are the costs relating to compliance with regulatory requirements.