First off, I'm sorry you're going through this. It can definitely be a tough thing to incentivize employees when you're upside down. But you're on the right track thinking about a repricing. Let me see if I can break this down for you:
Typically, repricing happens by either reducing the strike price or the exercise price option holders have to pay to get them back in line with fair market value (FMV). But it comes with a few legal hurdles you'll need to be aware of. If you're in the US, you have ISO status, and you want the favorable tax treatment that comes with it, then the repricing means two things.
First, the value of the repriced stock can't exceed a $100,000 FMV, and second, your clock resets. Any company that wants to take advantage of their ISO status always has to hold those shares for a 2 year period. When the repricing occurs, that clock will start over again.
If you're NOT in the US, then depending on where your employees are, you could be subject them to taxes. The reason is that a repricing in places like Belgium, Ireland, and Canada amounts to a new grant, and these countries tax at the time of grant in certain circumstances.
There isn't a clear path to tell you to take, but hopefully this will help you understand your options. Best of luck!
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Valentin Haarscher
CEO & Co-Founder
Easop
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Original Message:
Sent: 02-20-2024 10:22
From: Milos Galanis
Subject: Come Ask Your Questions To Me (Valentin) And The Easop Team!
It's been a tough year and a lot of my employees' option grants have an exercise price per share higher than the current actual fair market value of one share (effectively - they're underwater). I'm considering some sort of repricing to get their options back to FMV and motivate them. What's the best way to handle this?
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Milos Galanis
Original Message:
Sent: 02-20-2024 09:00
From: Valentin Haarscher
Subject: Come Ask Your Questions To Me (Valentin) And The Easop Team!
Hi, Carta Community! I'm Valentin (you can call me Val) and I'm the CEO and Co-founder of Easop. Easop does one thing really well - we make it easy to issue and approve compliant stock option grants to international employees. When you want to issue an options grant to your employee in, say, Poland, you can use Easop to generate documentation compliant with Polish law faster and at lower cost than ever before.
And as part of that, we've had to learn an enormous amount about equity not just in the US, but in 70+ countries across the world.
I'm excited to kick off this Ask Me Anything event, and I'd like to welcome you to ask me all your questions about Easop, international equity, compliance, and beyond, and I'll do my best to answer. Let's do it!
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Valentin Haarscher
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