Saturday, November 17, 2007
Saturday, November 10, 2007
Great Argument
This YouTube Video lays out a very compelling argument for action against climate change. It's 9 minutes long, complete worth watching. I'm not really sure why it gets the title that it does. Seems like a somewhat hopeful video to me.The Most Terrifying Video You'll Ever See.
Wednesday, November 7, 2007
Awesome news
From Business Wire:
"SANTA CLARA, Calif. & MENLO PARK, Calif.--(BUSINESS WIRE)--Agilent Technologies Inc. (NYSE:A) and Velocity11 today announced that they have signed a definitive agreement for Agilent to acquire Velocity11. Velocity11, privately held, is a leader in automated liquid handling and laboratory robotics for the life science market. Financial details were not disclosed. The acquisition is expected to be final in 30 to 60 days, subject to certain closing conditions."
This is pretty great news!! I worked really hard for the last 4 years at Velocity11, and exercised all of the options that I could before I left. This news means that I get a nice extra Christmas present this year. As the article says, the financial details won't be worked out for another 30-60 days so I won't know exactly what it means for me, but I have a rough guess, and it definitely won't be enough for me to retire on. Still, it's certainly better than having to pay taxes on options that have no real value!
See, this is the thing that sucks about stock options: Let's say you start working for Acme and their shares are trading on the stock market for $10 a share at the time. Perhaps you're a valuable employee and they give you some stock options. They say "You have the option to buy 100 shares of our stock at $10 per share, but you can only do that after you've worked here for a year." This is an incentive for you to increase the value of the stock. After a year if the stock is worth $20 you can buy 100 shares of it at $10 a share instantly making $10 per share, or $1,000. Isn't that nice! Of course, you have to pay taxes on that $1000. So you really only get to take home maybe $800. Still, you've made $800! Great!
Now, let's say you work for a privately held company like Velocity11. It's not traded on the stock market and so it's share values are harder to calculate, but the company makes an estimate and says they're worth $0.1. [Please note that I am pulling numbers out of thin air here. These are not real values. I'm making them nice and round so they're easy to work with.] Again, you get the option to purchase 100 shares after 1 year. So, at the end of one year you buy your options for $10 and you get, drum roll please...
nothing.
Velocity11 is a private company. You can't sell those shares that you bought because they're not on the market. Well, technically, you could sell them back to the company, and if Velocity11 doesn't want the shares (they have first right of refusal) you could sell them to another Velocity11 employee. This is only theoretically possible though. There really is no market for your options. During the year since you started, the company has grown and now the company estimates that the shares are worth $1. So, theoretically, on paper, you've spent $10 to make $100. A profit of $90. Of course, since you can't really sell those shares you haven't really made the money yet. You're still out $10, but wait it get's worse.
The IRS doesn't care. They don't care that you can't sell your shares. They don't care that you have -$10 in your pocket. In their mind, you've got $90 in your pocket and they want you to pay taxes on that, just the same as it were real. So, not only are you down $10 for the shares, you're down another $18 in taxes. How much does that suck? You haven't made any money on the shares you bought, but you have to pay taxes as if you had made money. But wait, it get's worse.
There's no guarantee that you will ever be able to sell your options. Velocity11 could go belly up and then you'd have spent $10 on options and paid $18 in taxes and have nothing to show for it at all! If that happens you can write it off on your taxes for the next several years until you eventually get the $18 back, but still you've lost $10 and given the government an $18 interest free loan. Awesome .
That's the boat that I was in until this morning. I'd exercised my options and had nothing to show for it. Would the options ever have value? Would I have any savings left after I paid my taxes? It was basically a crappy old row boat that I was in. I'd spent my $10, I was going to have to spend another $18 this spring at tax time, and I'd have nothing to show for it except some hope that someday I'd be able to sell the shares for more than I paid for them. Today though, I'm in an entirely different, much nicer boat. This boat has a motor, and a cooler full of beer. As I've said, I don't know the details, but I do know that I'll at least get my $10 back, and will have the money to pay the $18 in taxes. And, that's great news for today: The options aren't worth nothing! In the next 30-60 days I should know what their real value is and have a better idea of what that means for me. For today I'm just glad to know that I made a good decision to exercise.
This is good news for me, my friends at V11, and in my opinion, good news for Velocity11 as a company too. Agilent seems like a really good fit for V11. They offer complimentary products and services, without really any overlap. I'm excited to see the company continue to grow and to feel like I played a small part in brining it to where it is now.
"SANTA CLARA, Calif. & MENLO PARK, Calif.--(BUSINESS WIRE)--Agilent Technologies Inc. (NYSE:A) and Velocity11 today announced that they have signed a definitive agreement for Agilent to acquire Velocity11. Velocity11, privately held, is a leader in automated liquid handling and laboratory robotics for the life science market. Financial details were not disclosed. The acquisition is expected to be final in 30 to 60 days, subject to certain closing conditions."
This is pretty great news!! I worked really hard for the last 4 years at Velocity11, and exercised all of the options that I could before I left. This news means that I get a nice extra Christmas present this year. As the article says, the financial details won't be worked out for another 30-60 days so I won't know exactly what it means for me, but I have a rough guess, and it definitely won't be enough for me to retire on. Still, it's certainly better than having to pay taxes on options that have no real value!
See, this is the thing that sucks about stock options: Let's say you start working for Acme and their shares are trading on the stock market for $10 a share at the time. Perhaps you're a valuable employee and they give you some stock options. They say "You have the option to buy 100 shares of our stock at $10 per share, but you can only do that after you've worked here for a year." This is an incentive for you to increase the value of the stock. After a year if the stock is worth $20 you can buy 100 shares of it at $10 a share instantly making $10 per share, or $1,000. Isn't that nice! Of course, you have to pay taxes on that $1000. So you really only get to take home maybe $800. Still, you've made $800! Great!
Now, let's say you work for a privately held company like Velocity11. It's not traded on the stock market and so it's share values are harder to calculate, but the company makes an estimate and says they're worth $0.1. [Please note that I am pulling numbers out of thin air here. These are not real values. I'm making them nice and round so they're easy to work with.] Again, you get the option to purchase 100 shares after 1 year. So, at the end of one year you buy your options for $10 and you get, drum roll please...
nothing.
Velocity11 is a private company. You can't sell those shares that you bought because they're not on the market. Well, technically, you could sell them back to the company, and if Velocity11 doesn't want the shares (they have first right of refusal) you could sell them to another Velocity11 employee. This is only theoretically possible though. There really is no market for your options. During the year since you started, the company has grown and now the company estimates that the shares are worth $1. So, theoretically, on paper, you've spent $10 to make $100. A profit of $90. Of course, since you can't really sell those shares you haven't really made the money yet. You're still out $10, but wait it get's worse.
The IRS doesn't care. They don't care that you can't sell your shares. They don't care that you have -$10 in your pocket. In their mind, you've got $90 in your pocket and they want you to pay taxes on that, just the same as it were real. So, not only are you down $10 for the shares, you're down another $18 in taxes. How much does that suck? You haven't made any money on the shares you bought, but you have to pay taxes as if you had made money. But wait, it get's worse.
There's no guarantee that you will ever be able to sell your options. Velocity11 could go belly up and then you'd have spent $10 on options and paid $18 in taxes and have nothing to show for it at all! If that happens you can write it off on your taxes for the next several years until you eventually get the $18 back, but still you've lost $10 and given the government an $18 interest free loan. A
That's the boat that I was in until this morning. I'd exercised my options and had nothing to show for it. Would the options ever have value? Would I have any savings left after I paid my taxes? It was basically a crappy old row boat that I was in. I'd spent my $10, I was going to have to spend another $18 this spring at tax time, and I'd have nothing to show for it except some hope that someday I'd be able to sell the shares for more than I paid for them. Today though, I'm in an entirely different, much nicer boat. This boat has a motor, and a cooler full of beer. As I've said, I don't know the details, but I do know that I'll at least get my $10 back, and will have the money to pay the $18 in taxes. And, that's great news for today: The options aren't worth nothing! In the next 30-60 days I should know what their real value is and have a better idea of what that means for me. For today I'm just glad to know that I made a good decision to exercise.
This is good news for me, my friends at V11, and in my opinion, good news for Velocity11 as a company too. Agilent seems like a really good fit for V11. They offer complimentary products and services, without really any overlap. I'm excited to see the company continue to grow and to feel like I played a small part in brining it to where it is now.
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