Does an exercised option become stock?

September 13, 2004

Subject:   Pre IPO Question
Date:   Tue, 7 Sep 2004
From:   Brian


Does an exercised option become stock? If yes, if I think a stock might split pre-IPO or shortly after, would it be beneficial to exercise some options?



Date:   Fri, 10 Sep 2004

Hello Brian,

Yes, when you exercise a stock option you receive company stock. And yes, in many cases, employees have found it’s to their benefit to exercise their stock before an IPO because then they hope to receive capital gains for the appreciation after the public offering. (Be careful with early exercises of ISOs. See caution above.)

Good luck!

Mike Gray

For more information about incentive stock options, request our free report,“Executive Tax and Financial Planning For Non-Qualified Stock Options”.

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