In this case study, we helped a client in a 6-month blackout period see how their Non-Qualified Stock Options (NSOs) & Restricted Units might impact their personal balance sheet (and cash flow) once they were finally able to sell shares.
We built this framework from the ground up, based on what our client told us they needed to see in order to gain more comfort and confidence around selling their company stock, not only right after the blackout period, but also over time, as more shares vest at different strike prices.
After going public, the stock was more volatile than expected, so we modeled out several different scenarios to show, in a real time interactive format, how various prices might impact their decision to sell (and/or exercise their NSOs and hold the net shares).
Each scenario includes the gross taxable value of their stock awards, the Fed & California tax paid if sold, for NSOs the net shares post exercise, the value of vested and unvested shares, and several toggles that we use to show how much cash may flow to their balance sheet by selling portions of certain grants (as opposed to the entire grant).
Taking that a step further, we added a ‘cash flow’ section on to their balance sheet. With three simple line items, this gave them more perspective on how allocating the net proceeds from the stock sales in different combinations of income and growth funds could affect their cash flow and return on investment.
Our goal in doing all this was to help them better prepare – financially, emotionally and mentally – for selling the right shares, in the right way, at the right time, (and in a way that was most aligned with their goals and comfort level) once the lock-up ended.
This Matrix is just one example of how our Family CFO approach helps Biotech execs get more clarity (in what are often volatile IPOs) when the stakes are high.
You fight for us. We fight for you. Many, many thanks.
Disclaimer: For information purposes only and should not be interpreted as legal, tax or financial advice. Always consult your CPA/tax advisor/attorney (or reach out to us;) to discuss your specific situation. Past performance is no guarantee of future results.
