There are a list of companies claiming to provide liquidation for employees who have ISOs in private startups but don't have the means to exercise them (because of the ridiculous amount of phantom tax you would pay due to your AMT the next year):
Maybe SecondMarket and SharesPost fall into this category as well.
But for all of these companies like EquityZen, they claim that they can front you the money to buy your stock but you would owe them some % every year in loan interest. I've heard that the numbers can come out to basically taking off 33% of your total stock share after a few years. However, even still, the employer would still have to approve of the services for the employee to actually go on EquityZen to sell. So my questions are (hopefully someone reading this has had experience and can speak to that):
- Are these companies legitimate? i.e. if for some reason the stock value drops to 0, but you've borrowed like $4 million, can they somehow try to collect that money even though in the contract it says that they won't?
- for EquityZen, i think you have to go through the employer's approval, and my understanding is that most employers don't allow these services. so in that case, is there even any use at all for these services? like do people actually even use these services?
- If you were forced to use these services (i.e. you were about to get fired or had to quit and lose ALL your shares, would these companies suddenly change the terms?)
- If you took out a loan with these companies, but then your employer decides to stay private forever, what happens to your loan?
- Are these services basically like loan sharks?