Thanks for the clarification about post exercise selling of shares (that you're taxed on the difference between exercise price and sale price).
I agree the argument that you make money on exercise doesn't make sense - especially since the company could easily crash afterwards and you can still get stuck with a huge tax bill for value you never actually realized (except on paper).
Agreed you won't get full value, but I think the existence of liquidity events like this one is an example of private companies "figuring out a way to make this work". They're letting employees realize some value from their equity.
Nothing can be done about the 2 million dollar shack in the valley though (unfortunately).
One other option sometimes available that I didn't mention is filing an 83b election with the IRS and exercising options early before they've vested and before there's a fair market spread. You can avoid taxes this way, but you're putting money at risk very early and often you're not able to do this anyway (there are rules about early exercise).
I agree the argument that you make money on exercise doesn't make sense - especially since the company could easily crash afterwards and you can still get stuck with a huge tax bill for value you never actually realized (except on paper).
Agreed you won't get full value, but I think the existence of liquidity events like this one is an example of private companies "figuring out a way to make this work". They're letting employees realize some value from their equity.
Nothing can be done about the 2 million dollar shack in the valley though (unfortunately).
One other option sometimes available that I didn't mention is filing an 83b election with the IRS and exercising options early before they've vested and before there's a fair market spread. You can avoid taxes this way, but you're putting money at risk very early and often you're not able to do this anyway (there are rules about early exercise).