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Companies can grant two kinds of stock options: nonqualified stock options (NQSOs), the most common type, and incentive stock options (ISOs), which offer some tax benefits but also raise the risk of the alternative minimum tax (AMT). See the help article for more information about the difference between the two.
Vesting is the process by which you earn your shares over time. The typical vesting schedule is over four years with a one-year cliff — meaning that on your one-year anniversary, you will have vested 25% of your initial grant. After the cliff, your options will vest monthly until you are fully vested after four years. Vesting acceleration happens when your stock vests faster than the original schedule dictates — if your company gets acquired or participates in a merger.
Stock options always have a limited term during which they can be exercised. The most common term is 10 years from the date of grant. Of course, after the vesting period has elapsed, the actual amount of time to exercise the options will be shorter (e.g. six years after a four-year vesting requirement). If the options are not exercised before the expiration of the grant term, they are irrevocably forfeited.
Employees who leave the company before the vesting date usually forfeit their options. With vested options, departing employees typically have a strictly enforced timeframe (often 60 or 90 days) in which to exercise — they are almost never allowed the remainder of the original option term.
This estimate is our baseline value of a common share. For every company on our platform we use public data sets to understand the pricing of your last fundraising round. From that, we transform the price your investors paid for a “preferred share” into a “common share”. Common shares trade at a discount to preferred, as preferred shares have greater rights and protections.
Companies put clauses in the stock purchase agreement that explain their position on pre-IPO transfers. You can ask your legal department for a copy of the Stock Purchase Agreement (SPA), or if you've already exercised options, you likely were sent a signed copy of the SPA post exercise.
The secondary stock sale space has been around for a bit and even if your company does not support outright sales of pre-IPO stock, different brokers will offer forward contracts that allow for you to get paid now, while you remain titled to your shares. When your company goes public, you are obligated to deliver the shares to the investor then - as public companies can't enforce share sale restrictions.