Jim Flaherty is poised to announce his new budget and instead of the tradition of the finance minister buying a new set of shoes, instead he had his existing shoes re-soled, which I think is a message to say, “Tighten your belts folks, leaner times are ahead” (at least that would be my spin on it). Interesting that he can make that statement given the government is about to announce a $13Billion surplus, which will mostly be used to pay down the national debt (which I agree with as a tactic for using surplus spending, however, I am not happy with the enormity of the surplus itself).
Some new measures may be brought in but it is unlikely to effect (affect?) my wallet too much. The fact that this is the 3rd budget for Mr. Flaherty for a Minority government is quite the achievement.
Stock Options
I have worked in High Tech all of my career, but I think I am one of the few folks who never, ever had a chance to cash in a large amount of stock options for their company. I just never got options until very late in the game and then they became worthless quickly. I state this as a preface (and as a whine as well).
Yesterday I sat down with a couple of co-workers and this topic came up and I was shocked to have them both admit to me the amount of money they “left on the table” with their options. I am assuming they did make some money on options, but the amounts they both quoted me as potential profits they didn’t act on caused my head to spin (well over a million dollars combined).
Why would you leave that kind of money on the table? Here are some of the reasons I know of:
- The options had not fully vested. In this instance I don’t view that as lost money, since you were unable to do anything about this, and you shouldn’t beat yourself up about this “lost potential money”.
- I thought the stock would recover. I guess we can see that one, was not a good strategy, in hind sight we can see you should have taken the money and run.
- I was waiting for the Stock Options Tax changes. That one had me scratching my head, but I guess it’s a valid reason.
- I bought the stock with my options and then held it to live on dividends and capital gains. That one is the most lethal mistake that I have heard. These people really did lose money on this, because they spent the money on the options and then got nothing for that money. The previous three “mistakes” didn’t lose you real money, it just lost you potential money, this one lost real money.
- My options were never worth more than a $1000 ever . That is my excuse, I feel like the Eunuch at the orgy sometimes, never got anything out of this whole thing, oh well.
At the end of it all, lost potential money is much like Love Lost, not much you can do about it, so you might as well forget about it.
Any other High Tech Stock Option stories out there?
It is not sheltered in a DPSP. But we also have a profit sharing, and this one is sheltered. So, I’m leaving the cash inside my DPSP and I’m learning what I should do to my stocks. Maybe, as the amount is small I will transfer to my RRSP for this year and next year, with more experience I will decide what to do.
Thanks for your help.
As for the 50% matching, depends on what the matching amount is. If this amount is sheltered in a DPSP, then NEVER cash the darn thing in, it’s like an RRSP and you should keep it sheltered (maybe try to move it into a self directed RRSP, or something).
As for the horror story… Karma is a nasty thing and hopefully the wheel will turn on them.
Stock option story? How about getting scammed by (ex-)employer?
(True story, but not mine.)
When joining the company, the person was told the company is going to IPO thus was in quiet period. After IPO, there will be stock purchase plan.
Fair enough.
Fast forward almost a year. IPO fell through, so said person decided to press for stock options again. After a few more weeks of back and forth between manager and HR, the company offered a paltry stock options (worth less than 2 weeks gross income in FMV), spread over 4 years, and start counting on the day the options were given, not the actual start date.
Said person felt shafted, was furious for a few days.
As time went by, said person’s work stress continued to climb due to lack of executive commitment. Needless to say, said person’s frustration towards the company grew.
The company, running so short on cash, did eventually settle to IPO in a small exchange. Despite multiple “advertisement” from executives to vest options and purchase stock through special employee purchase plan, participation level was much lower than expected. The company ended up providing interest-free, principal gradually reducing, option-vesting loans to employees.
Our protagonist finally decided to take the loan to vest the options (which was treated more as a gamble). To the ultimate dismay of said person, HR came back and said they had no record of the options. Same thing with a few other employees who were hired around the same time.
After another few rounds of back and forth, with paper and email trails as evidence, HR came back and gave everyone half of the original (read: already paltry) options, but, as a favour, spread over 3 years instead of 4, starting on the day options were originally given. This batch of options supposedly had to went through the board of directors to get approved.
The person, and all but one of the group who were short-changed, had all since left the company. The company’s stock price is hovering about 30-40% of IPO price.
Sorry if it is a dumb question, but I work in a company where we can buy stocks and at the end of the year the company matches 50% in whatever I have there.
I know it depends if the stock goes up/down, but is it a good idea to wait until the beginning of next year, sell the stock and then re-invest somewhere else?
And doing this, do I need to pay taxes for CG/CL when doing my income tax?
Thanks!
I worked with many people who held stock options that were worth very large amounts and just held them until they were worthless. I participated in countless discussions with coworkers about when to sell. I think the top reasons for holding on (and ultimately losing everything) were as follows:
1. Nobody wants to be the guy who cashes out early and watches his colleagues continue to get richer as the stock keeps climbing.
2. Most people thought in terms of all or nothing. Instead of selling a little at a time, they looked for the best time to sell everything. Somehow that “best time” never arrived.
3. For some reason, if 5 people got together to discuss this topic with 4 thinking it was time to sell and only one thinking the stock would keep going up, the one guy would seem most persuasive.
4. Selling company stock felt like being disloyal to the company. Selling company stock felt inconsistent with believing in the company’s future and believing that one’s job was worthwhile and had meaning.