Question 1

What are ISOs?

Accepted Answer

An incentive stock option (ISO) is a corporate benefit that gives an employee the right to buy shares of a company at a
discounted price with the added benefit of possible tax breaks on any profit made. The profit on qualified ISOs is usually taxed at the capital gains rate, not the higher rate for ordinary income.

Question 2

What are NSOs?

Accepted Answer

A non-qualified stock option (NSO) is a form of equity compensation that can be provided to employees and other stakeholders. An NSO gives recipients the choice to purchase a company’s stock at a predetermined price, which can be profitable if the stock price rises above that level.

Question 3

What is a preferred stock?

Accepted Answer

Preferred stock differs from common stock in that it usually grants holders a fixed dividend, whereas for common stockholders, the dividend will depend on the performance of the company, and they may receive no dividend at all.
Often preferred stock does not have voting rights.
In the case the company has to be liquidated, it has higher priority than common stock over the assets of the company.

Question 4

What is common stock?

Accepted Answer

Common stock is, as its name suggests, the most common type of stock that a company issues.  It has various rights attached to it, including voting rights at shareholder meetings and the right to a proportion of any dividends
the company distributes..
In the case the company has to be liquidated, preferred shares generally take priority over common shares in the distribution of the company’s assets.

Question 5

How do you price the shares?

Accepted Answer

We use the last financing round of the company as a benchmark for the share price. Other factors that determine the price are publicly available information, investor demand, pricing history from past secondary transactions, etc.
Typically, we work with the seller to determine price for each investment opportunity.

Question 6

What happens if the Secondary Sale is oversubscribed?

Accepted Answer

If the total number of shares (and vested options) offered for sale across all participants in the Secondary Sale exceeds the total number of shares that investors are offering to buy, then the Secondary Sale will be oversubscribed.  In this case, the Company will decide how to reduce the number of offered shares, so it matches the number sought by investors.

One of the common approaches that companies take when dealing with oversubscription is to reduce the number of shares offered for sale on a pro rata basis (based on the number of Eligible Shares held by each participant).
In any case, you should thoroughly review the sale agreement for additional details.
We at Simetria will inform you via email once the company provides the final sale information on the Sale Determination Date.

Question 7

Once I have submitted the required documents and elected to sell equity in connection with the Secondary Sale, can I change my mind?

Accepted Answer

Yes, but only until the Sale Expiration Date.
At the Sale Expiration Date, you will be obligated to sell all the shares that the buyers have accepted and, if you are an option holder, the number of your vested options that will be automatically exercised will correspond the number of vested option Shares that the buyers have accepted, and you may no
longer withdraw from the Secondary Sale.

Question 8

What is the difference between holding shares in a private company versus a public company?

Accepted Answer

Although owning shares in any company means the holder is a part-owner of that company, with certain rights such as receiving dividends, there are big differences too.
 
The biggest difference is that shares in public companies are listed on public stock exchanges, such as the New York Stock Exchange, with a quoted price for the company’s shares.  Investors can buy and sell these company’s shares through the exchange, usually quickly and at low cost.

Also, public companies must make publicly available extensive information, including quarterly financials.
 
With private companies, their shares are not listed on any exchange, and nor is there a continuously quoted price for the shares.  If there is a sale of a private company’s shares, it takes place in a private secondary market.  Such a market cannot be accessed by retail investors, who instead must go through specialist intermediaries.  Also, buying or selling of private company shares takes a lot longer and is significantly more expensive than for for shares in a public company.
 
The other big difference is that whereas in the case of a public company, the company is not involved in investors buying and selling their shares, this is not the case for private company shares.  Here, the private company has the right to approve all purchases and sales of its shares.

Question 9

What is the difference between shares and options?

Accepted Answer

Shares, also often called stock, represent a part ownership of the Company.  They give certain rights to the owner, for example to vote in shareholder meetings (including to elect Directors) and to receive dividends in proportion to the number of shares held.  There are different types of shares with slightly different rights.  Most shares are called “common shares”, but others such as “preference shares” may entitle the holder to a fixed dividend.
 
There are various forms of options but, essentially, they give the holder the right to receive or purchase shares in the future based on meeting the conditions set when they were awarded.  These conditions may include a minimum holding duration, such as 3 years, or meeting certain performance criteria.  At that point, they may involve the holder receiving shares or being given the right to buy shares at a price set when the options were awarded.

Question 10

Is it possible to sell unvested options as well?

Accepted Answer

Companies do not usually permit the sale of options that have not yet vested, and Simetria does not currently offer this facility.

Question 11

What is the Secondary Sale?

Accepted Answer

In contrast to a primary sale, where a company offers new shares directly to investors for the first time, a secondary sale is a specific sale event where a company’s previously issued shares are traded between shareholders and investors.

Frequently asked questions