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If your former employer will not buy back your vested options or include you in a liquidity event, act before the post-termination exercise window closes. Find the signed grant and equity plan, verify the exact deadline, ask the company in writing about any tender offer or approved secondary sale, and model the cash and tax cost before exercising. Vested options are not cash: private-company shares may remain restricted, unmarketable and potentially worthless.

This is a general U.S. federal framework. Your grant language, option type, state, tax residence, issuer and shareholder agreements can change the result, so obtain individualized legal and tax advice for a significant decision.

Start with the contractual clock

The most urgent risk is losing the right to exercise. Employment termination usually starts a post-termination exercise period, but the length is controlled by the signed option agreement and equity plan. The SEC’s 2007 statement describes a limited period and gives 90 days as an example; 90 days is not a universal rule. Some plans provide a different period for an involuntary termination, death, disability or retirement, while an incentive stock option can lose its statutory status if exercised too late.

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  1. Collect the controlling records. Download the signed grant notice, equity plan, amendments, termination notice, award-portal statements, cap-table records and any exercise, transfer or shareholder documents. A portal balance is useful evidence, but it does not replace the executed documents.
  2. Record the economic terms. Write down the grant date, number vested, strike price, expiration date, option classification (ISO or NSO), vesting schedule, exercise method, and any early-exercise or net-exercise provisions.
  3. Calculate every relevant date. Identify the termination date, the last day of the post-termination window, the final contractual expiration date and any notice or payment deadline. Ask the issuer’s equity administrator to confirm those dates in writing.
  4. Preserve evidence. Keep emails, tickets and letters showing what the company told you. If a representative gives an answer that conflicts with the plan, request the specific section on which the answer is based.

Do not wait for a promised future financing or initial public offering before checking the deadline. An option can expire while a company is privately valued at a high number, and an unexercised option normally gives you no ownership interest after expiration.

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Ask the company whether any approved liquidity exists

A former employer may have a tender offer, issuer repurchase, company-facilitated secondary transaction or another window that includes former employees. The company is not generally required to create such an event merely because options are vested. Eligibility, price, size limits and timing are issuer-specific.

Send a concise written request to the equity administrator, finance team or legal contact. Ask each question separately:

  • Is there a current tender offer, repurchase or company-approved secondary transaction?
  • Are former employees with vested options eligible, and are former employees treated differently from current employees?
  • Must options be exercised before participating, or can the transaction handle exercise costs?
  • Can the company withhold shares or sale proceeds to cover the strike price or taxes?
  • What price, valuation date, share cap, fees, settlement date and tax forms apply?
  • Are board approval, investor consent, a right of first refusal or other transfer approval required?
  • Is another transaction planned, and if so, what eligibility and deadline information can the company disclose?

Ask for the governing notice and participation agreement, not just an informal assurance. A statement that “there is no liquidity” may mean no current offer, not that a future offer is impossible. Conversely, a company’s refusal to provide liquidity is not automatically a breach of contract; counsel must compare any alleged promise with the plan, grant and governing law.

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Understand what “vested” does and does not mean

Vesting means you earned the contractual right to exercise the specified number of options, subject to the plan’s conditions. It does not mean the options are shares, that they can be sold, or that they remain exercisable indefinitely. Exercising converts the option into shares; it does not guarantee a buyer.

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Private-company shares are commonly subject to transfer restrictions, issuer consent, rights of first refusal and securities-law limits. A private valuation used for compensation or financing is not cash you can necessarily realize. Even if a later sale occurs, there may be no market at the price shown in an internal valuation.

Compare the four practical paths

Path Cash needed now Liquidity certainty Critical checks
Company tender offer or repurchase Depends on the transaction and whether exercise is required Available only if an offer exists and you qualify Eligibility, price, share cap, timing, fees, tax treatment and issuer documents
Private secondary sale May include the strike price, taxes and transaction costs Low; a buyer, legal exemption and issuer permissions may all be needed Transfer restrictions, right of first refusal, securities exemption, state law and buyer diligence
Exercise and hold Strike price plus possible tax and other costs Low and potentially indefinite ISO/NSO status, deadline, tax model, restricted-share terms and loss tolerance
Do not exercise No exercise outlay No liquidity from the option; it may expire Exact expiration and whether preserving uncertain upside justifies the cost and risk

Path 1: Participate in a company-sponsored event

A tender offer or issuer repurchase can be the cleanest route because the company sets the process and can address approvals, settlement and information rights. Read the offer carefully: a transaction may cover only exercised shares, impose a minimum or maximum number, offer a price below a recent financing valuation, or restrict participation by former employees.

Confirm whether you must exercise first and, if so, how you will fund the strike price and taxes. Ask whether the company will net-settle, withhold shares, or permit exercise-and-sell at closing. Check the expiration of your option separately; an offer deadline does not necessarily extend the contractual exercise deadline.

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Path 2: Exercise and hold

Exercising can preserve ownership in the underlying shares while the option is still exercisable, but it turns a time-limited right into an illiquid investment. Before sending funds, calculate the total strike cost, possible tax, legal and administrative fees, and the amount you could lose if the company never provides a sale opportunity.

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Assess concentration risk as well. If your compensation, savings or future employment depends on the same company, holding more private shares may increase exposure to one issuer. Decide whether you can hold indefinitely without borrowing or needing the money for near-term expenses.

Path 3: Find a private secondary buyer

A buyer may be interested in private shares, but a marketplace listing does not make a transfer lawful or permitted by your documents. First determine whether the shares can be transferred, whether the issuer has a right of first refusal, and whether board or investor consent is required. Obtain the issuer’s written position before paying an intermediary or disclosing confidential company information.

Federal securities law may require registration or an available exemption. State securities laws can add requirements. The SEC’s private-secondary-markets guidance emphasizes that private securities are often illiquid and not freely tradable. A lawyer should identify the applicable exemption, prepare representations and review the company’s transfer procedures.

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Path 4: Decline to exercise

Letting an option expire can be rational when the strike price, tax exposure and restrictions outweigh a realistic—not merely headline—estimate of future value. Compare the money you would spend and potentially lose with the uncertain value of the shares and the probability and timing of a lawful sale. Do not use a generic 90-day assumption; use the date in your documents.

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Model taxes before exercising

Tax consequences can arise before you receive sale proceeds. IRS Publication 525 (2025) distinguishes statutory options, including incentive stock options (ISOs), from nonstatutory options (NSOs), and the reporting depends on the grant, exercise, employment timing and later disposition.

ISOs

Internal Revenue Code section 422 sets statutory requirements for an ISO. The label in an award portal is not enough: review the signed grant, amendments and exercise history. An exercise can raise alternative-minimum-tax or other timing questions even when no shares have been sold. A tax adviser should model the exercise date, your income, holding period, state residence and potential sale scenarios.

NSOs

NSOs generally require analysis of compensation income at exercise based on the spread between fair market value and the strike price, with withholding and reporting consequences that depend on the transaction. The company’s private valuation and any applicable valuation method matter. Do not assume that an exercise funded with cash has no current tax effect.

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Build a written scenario model

  • Cash required for the strike price and any exercise fee.
  • Estimated federal and state tax at exercise and at a later sale.
  • Whether you could owe tax while the shares remain unsold.
  • How long you could fund the holding period without a liquidity event.
  • What happens if the shares become untransferable or lose all value.

A tax professional can explain the rules; a lawyer can address contractual and securities restrictions. Neither can guarantee that a private market will appear.

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Know the securities and transfer restrictions

Shares issued under the employee-compensation exemption in SEC Rule 701 are restricted securities and are not freely tradable without registration or an available exemption. The exact transaction, issuer status and documents determine which restrictions apply.

Rule 144 is one possible resale safe harbor for restricted or control securities. SEC guidance states that, when restricted shares are acquired by exercising an employee stock option, the Rule 144 holding period begins on the exercise date rather than the grant date. Rule 144 also has different conditions depending on issuer reporting status, affiliate status and other facts. Meeting a holding-period condition does not create a buyer, override a right of first refusal or compel the issuer to approve a transfer.

Have counsel review the equity plan, grant, shareholder agreement, charter, investor-rights documents and any transfer form. Confirm confidentiality obligations before sharing a cap table, financial projections or other company information with a prospective buyer.

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If the company gives conflicting answers or refuses to clarify

Escalate methodically while the exercise window remains open:

  1. Send a dated request identifying the grant, termination date and specific question.
  2. Attach only the documents needed to resolve the issue and ask the company to cite the controlling provision.
  3. Request correction of any inaccurate portal balance or deadline in writing.
  4. Contact an employment or securities lawyer promptly if the company contradicts the signed documents, denies a substantial amount, or refuses to state whether exercise is still available.
  5. Ask counsel whether a protective exercise, notice of dispute or other action is appropriate; do not send money or sign a release without understanding the consequences.

Keep a calendar reminder several business days before each deadline. Administrative delays, wire-transfer problems and signature requirements can make a last-day exercise impractical.

A decision worksheet

Write the answers down rather than relying on an optimistic valuation or a verbal promise. Your decision should account for:

  • Forfeiture risk: the exact date on which the option disappears.
  • Total outlay: strike price, estimated tax, fees and professional advice.
  • Liquidity prospects: a documented offer, a credible transaction path or no identified buyer.
  • Legal ability to sell: transfer clauses, issuer consent, rights of first refusal and securities exemptions.
  • Time horizon: whether you can hold restricted shares for an unknown period.
  • Downside: the possibility of losing the entire amount invested.

Only after these items are documented should you choose between an approved company transaction, exercise-and-hold, a permitted secondary sale or no exercise.

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Common mistakes to avoid

  • Treating “vested” as “cash” or assuming an internal valuation is a sale price.
  • Assuming every former employee receives 90 days to exercise.
  • Exercising before calculating tax and the full cash requirement.
  • Assuming an ISO label guarantees favorable tax treatment.
  • Advertising shares on a secondary marketplace before checking transfer restrictions.
  • Assuming Rule 144 guarantees a buyer or eliminates issuer approval.
  • Waiting for the company to contact you while the contractual deadline approaches.

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