The Post-IPO Dilemma: Hedging Your Stock

If your company recently went public and your stock price has gone up significantly then you’re probably wondering how you can hedge your position. Unfortunately there’s nothing you can do while you’re still in the 180-day lock-up period. Most lockup agreements have extremely detailed restrictions included, designed to prevent almost any form of market participation with a security.  It’s too long to reproduce anything but a sample here, but it typically begins like this: In consideration of the Underwriters’ agreement to purchase and make the Public Offering of the Securities, and for other good and valuable consideration receipt of which is hereby acknowledged, the undersigned hereby agrees that, without the prior written consent of each of [names of managing underwriters], […]

Making the Case for Financial Planners

There are a number of value-added services that can improve your financial future.  In the past we have written about the benefits of engaging a tax advisor and an estate planner. In this post we make the case for financial planners. We believe financial planning can make a huge impact on people’s lives. That’s why we have dedicated a number of our blog posts to the topic.  However we are aware that many people could benefit from having an expert to drill down further on the covered concepts.  That’s where a financial planner can really help. In our experience there are five primary areas where a financial planner can add value: Cash Flow & Budgeting Asset & Debt Management Helping […]

Announcing Wealthfront for iPhone

Wealthfront became the largest and fastest-growing software-based financial advisor—with over $700 million in assets under management— by providing a simple, automated service for managing your long-term investments. Wealthfront monitors your investments for opportunities to rebalance your portfolio and harvest tax losses every day so you don’t have to. Unlike most investment applications for the iPhone, Wealthfront decided to design, from the ground up, a way for our clients to see how their investments are being managed, anytime, from their iPhone. Download: Wealthfront for iPhone  A Personal Feed from Wealthfront The Wealthfront application is structured around a feed of updates about your accounts. Most of our clients appreciate that Wealthfront can be their “set it and forget it,” automated investment service. They […]

WhatsApp: What an Acquisition Means for Employees

The announcement that Facebook is buying WhatsApp for $19 billion generated a lot of interest. The most popular question we received is what does the acquisition mean for the employees financially. IPOs tend to get all the headlines, but in many cases technology companies are acquired. This post will walk through the economics of an acquisition and how it affects all the parties involved. The Terms of the Deal From what I have read, Facebook will acquire WhatsApp for $4 billion in cash and approximately $12 billion worth of Facebook shares. In addition Facebook will grant $3 billion in RSUs to founders and employees that will vest over the next four years. I do not have any special insight into […]

Shining a Light on the Muni Bond Portfolio

Most everyone I have ever met who is in a high tax bracket wants Municipal Bonds to be part of their portfolio. Unfortunately there are a number of misperceptions about Muni Bonds that cause people to make investments in them that are not necessarily in their best interest. This article explores how investors typically build Muni Bonds portfolios and the often-excessive fees they pay for such services. We also show how an ETF-based Muni Bond portfolio might be a superior approach when evaluated from the perspective of its impact on an entire diversified portfolio. Bond Ladders Most people are sold Muni Bond portfolios in what is known as a bond ladder. A ladder consists of a diversified portfolio of bonds […]

When Success & Stock Options Make It Expensive to Leave

They can be an incredibly rewarding and inviting incentive. And among those working in Silicon Valley stock options have become an inextricable part of most job offers. However, actually benefitting from them is not always as easy as you might think. Employees who decide to leave mid-sized companies often awaken to a pretty big and increasingly common surprise — they can’t afford to exercise their options. In our post The 14 Crucial Questions About Stock Options we discuss the questions you need to ask about the stock option component of your offer before you join a new company. We specifically didn’t address how long you see yourself staying with the new employer or when the company is likely to go […]

How Do Stock Options and RSUs Differ?

One of the biggest changes in the structure of Silicon Valley private company compensation over the past five years has been the increasing use of Restricted Stock Units (RSUs). I’ve been in the technology business more than 30 years and throughout that time stock options have almost exclusively been the means by which startup employees shared in their employers’ success. That all changed in 2007 when Microsoft invested in Facebook. To understand why RSUs emerged as a popular form of compensation, we need to look at how RSUs and stock options differ. History of the Stock Option in Silicon Valley More than 40 years ago a very intelligent attorney in Silicon Valley designed a capital structure for startups that helped […]

Tax Issues for Married Same-Sex Households

Sixteen states and the District of Columbia now allow same-sex couples to legally marry. Late last year, New Jersey joined the states already allowing it, and most recently, Oklahoma and Utah have overturned bans. All this followed on the heels of an IRS ruling in late August that recognizes legally married same-sex couples as married couples when it comes to federal tax purposes and other areas of federal law. And that ruling followed the defeat of the Defense of Marriage Act in June. All this adds up to a lot of people needing to either re-examine their filing status or aspects thereof. Simply put, if you have not already done so, you need to: Re-evaluate your federal filing status Consider […]

11 Questions to Ask When You Choose a Tax Accountant

If you are considering early exercising of a significant number of options or are thinking about selling options in the public market for the first time we highly recommend retaining a reputable tax accountant. We realize this means you will incur a fee, but it is highly justified given the risk you take on incurring significant unforeseen taxes if you don’t consult a great tax accountant.  It is not as easy to quantify the savings from hiring a tax accountant as it is from hiring an estate planner (see our recent post by Abe Zuckerman regarding Estate Planners), but it’s just as necessary. Like most people, you’re probably not sure how to choose a tax accountant.  Here are the top […]

Missing the Obvious on Fees

I have a personal confession. For nearly 50 years, I’ve missed the “obvious” reality: Fees for investment management are not low. They are high; very high. When investors recognize this “new reality” — that fees are not trivial but are crucial — the beautiful “inside” world of fund management will experience a powerfully disruptive revolution. It may not be sudden, but it is inevitable. Investors are not captives of the conventional practices of “performance” investing. They have proven alternatives. The process of getting to the “Ah ha!” moment can come through a few examples of how easy it is to miss (or misinterpret) reality. Missing the obvious Sometimes it’s due to deliberate deception — as when a magician has you […]