Question 1

What is Forge?

Accepted Answer

Forge works to help startup employees sell their vested shares so they can pursue their personal and financial goals.

As an employee at a fast-growing technology company, a large percentage of your compensation may be paid in equity, or stock in the company. Typically, you earn this stock over many years, and the amount may be refreshed throughout your career.

Today, the average startup stays private for 11 years before IPO. That means that it may be as long as 11 years before you can easily sell your shares through a traditional stock transaction.*

As a shareholder and an employee, you may want to convert some of that stock into cash to fund something else in your life, like a house. Or as a way to diversify your financial profile.

That’s where Forge comes in. Forge works to help you sell your shares so that you can use the money however you see fit.

*Jay R. Ritter, University of Florida, 6/17/2022

Question 2

How do I get started?

Accepted Answer

Selling your shares is a four-step process.

Create a free Forge account to access Forge’s next generation marketplace
Explore potential demand for your shares and view live market interest
Use proprietary pricing insights and market data to assess timing and valuation
Submit an indication to sell, negotiate terms, complete the transaction and receive your payment

Question 3

How do I value my private company shares?

Accepted Answer

Valuing private company shares can be complex since they don’t trade on public markets. Common methods include recent secondary market transactions, active bids and asks as well as 409A valuations —learn more about various pricing signals in this guide.

Also, the type of shares you hold—common, preferred or options—can differ significantly in value. Learn more in our blog “What is the difference between common shares, preferred shares, SPV units and stock options?”.

Forge helps provide visibility into private market pricing by offering recent trade data, indicative bids and asks and historical valuation trends when available. If your company is active on Forge, you may see a range of market activity that reflects real-time investor sentiment. Additionally, shareholders can use Forge Price™—which can offer a more timely and relevant reflection of company value and price discovery. Note that as Forge Price is a backwards-looking metric, it is not necessarily transactable. Explore Forge Price and discover actionable insights by creating an account.

Question 4

Will my company approve the sale of my shares?

Accepted Answer

Generally, startups and private companies (sometimes referred to as “issuers”) are supportive of shareholders selling shares to meet personal or financial needs. Each company may have its own procedures for managing stock transfers. Forge provides tools and guidance to help you navigate company-specific requirements, and expert support is available if needed.

Question 5

Does Forge charge a fee?

Accepted Answer

Forge provides transparent and flexible fees, as low as 0% in some instances. The Forge transaction fee for direct secondaries is typically 2-4%. The fee depends on several factors including transaction size, market dynamics, investment types, and customer lifetime transaction volume, among other considerations. For alternate investment structures, the fee can range higher than that of direct secondaries.

As a reminder, Forge does not charge a fee to create an account or to access our marketplace and join our global network of buyers and sellers. Unlike other secondary marketplaces with hidden platform fees or upfront subscription costs, Forge Securities only gets paid upon the completion of a successful transaction.

Question 6

How long will it take to sell my shares?

Accepted Answer

On average, a transaction may take 50 days from the time Forge matches a buyer and a seller. Forge keeps you apprised of the timelines and next steps, every step along the way.

Question 7

What is the difference between shares and options?

Accepted Answer

A stock option is the right – but not the obligation – to purchase company stock at a fixed price, known as the exercise price (or grant price), within a set period of time. Options are granted to employees as part of an Employee Stock Option Plan. Options provide you with the right to purchase actual shares of company stock and become a shareholder sometime in the future. As a shareholder, you may have voting rights and can potentially receive dividends. Option holders do not have those rights until they exercise their options and purchase shares.

Question 8

What is vesting?

Accepted Answer

Vesting is the process by which you earn the right to exercise the options in your Employee Stock Option Plan. In your stock option plan, there is a vesting schedule that details when and how your options "vest" or become available to exercise. Typically for a new employee, options vest over a four-year period with 25% becoming available to exercise on the first anniversary of the option grant. After the first year, it's common for option to vest on a monthly basis. However, option plans vary widely and it's important to read the details of your plan.

Question 9

Do my options expire?

Accepted Answer

Yes, options expire – timing varies, and you should refer to information provided by the company that granted the options. Option holders can exercise the option and realize profits or losses, or if they let the expiration date pass, the options cease to exist.

Question 10

What happens to my options if I leave my company?

Accepted Answer

Your expiration date may change if your employment status changes, and if you leave your company voluntarily, you may have up to 90 days from your termination date to exercise your vested options. This varies and should be confirmed with your employer.

Question 11

How do I exercise my shares?

Accepted Answer

A stock option is exercised when you pay the exercise (or grant) price to receive the shares.

Question 12

What is the Forge Options Exercise Bridge Loan?

Accepted Answer

It can be difficult to come up with the funds needed to exercise your vested, private company stock options, and Forge believes that option holders should have the ability to acquire and sell the equity they have earned. Forge Lending LLC offers employees an Options Exercise Bridge Loan that can provide you with the funds needed to exercise options and sell the resulting stock without incurring a significant upfront cash expense. Learn more here.

Question 13

What is Fair Market Value?

Accepted Answer

Fair Market Value (FMV) is the valued price per share of the stock; FMV is important for tax calculation purposes (at time of exercise and/or at time of sale depending on the type of stock options granted). A stock option may be worth exercising if the FMV of the underlying common stock is more than the grant price. For private companies, it is typically based on the company’s valuation. For public companies, it is based on the price the stock is trading on the stock market that day.

Question 14

Do I have to exercise my options?

Accepted Answer

Exercising options is a personal investment decision. Employees who want to sell their shares with Forge, however, must exercise their options.

Question 15

What is my exercise price?

Accepted Answer

Your exercise price is the price per share you must pay to purchase your shares.

Question 16

What is “early exercise”?

Accepted Answer

Early exercise is when you choose to exercise your stock options before they have vested. This can be a way to minimize your tax liability and increase potential gains depending on the Fair Market Value of your company and your exercise price. Some option holders choose to early exercise so that when the options vest, they already hold the shares. This can be tax advantageous to start the long-term capital gains clock ticking. It's important to point out that not all stock plans or companies offer early exercise.

Question 17

What is a “cashless exercise”?

Accepted Answer

A cashless exercise is when you exercise your options and then immediately sell the resulting shares. With a cashless exercise, you cover the expense of exercising the options with the sale proceeds. This is sometimes referred to as a same-day sale. Again, not all stock plans/companies offer this option.

Question 18

Can I exercise options before they vest?

Accepted Answer

If your options aren't vested, employers typically won't allow you to exercise them until a certain period of time passes, which tends to range from 3-5 years. This varies and should be confirmed with your employer.

Question 19

How is an exercise price determined?

Accepted Answer

The exercise price (or grant price) is the amount you pay to the company for each share, set by the company at the time the stock option grant is made.

Question 20

What is the difference between exercise price, grant price and strike price?

Accepted Answer

These terms are used interchangeably; it's the price at which an underlying security can be purchased when exercising the right to buy that security which the option gives you.

Question 21

Will my exercise price change?

Accepted Answer

The exercise price does not change. This means that if the value of the stock goes up, you have the opportunity to purchase a stock below Fair Market Value (FMV) and potentially profit the difference of your exercise price and the current FMV.

Question 22

Difference between common and preferred stock?

Accepted Answer

Common stock is typically issued to founders and early employees of a private company. The private company usually offers employees a stock plan that allows them to purchase common shares at a specified exercise price. Preferred shares are usually issued to investors and institutions when they participate in a primary funding round. Preferred shares typically come with certain rights and privileges that give them priority over common shares in the event of an acquisition, liquidation or bankruptcy.

Question 23

What are the tax implications of exercising?

Accepted Answer

Based on the type of stock option you’ve been granted (Non-Qualified Stock Options vs. Incentive Stock Options), you may owe taxes at exercise and sale or only at sale. Talk to a tax advisor about your total tax liability to avoid any unexpected surprises at the end of the year.

Question 24

What’s the difference between personal income tax and capital gains tax?

Accepted Answer

Income tax is paid on earnings from employment, interest, dividends, royalties, or self-employment, whether it’s in the form of services, money, or property. Capital gains tax is paid on income that derives from the sale or exchange of an asset, such as a stock or property that’s categorized as a capital asset.¹

1. Investopedia

Question 25

What is the 83b form?

Accepted Answer

The 83(b) election is a provision under the Internal Revenue Code (IRC) that gives an employee, or startup founder, the option to pay taxes on the total fair market value of restricted stock at the time of granting. The 83(b) election applies to equity that is subject to vesting and alerts the Internal Revenue Service (IRS) to tax the elector for the ownership at the time of granting, rather than at the time of stock vesting.¹

1. Investopedia

Question 26

What is a 409a valuation?

Accepted Answer

Private companies that want to issue shares to their workers must be appraised because, unlike public companies, there are no share prices available to view at any time. This is called a 409a valuation – an appraisal of a private company’s stock in preparation for issuing shares to workers. 409a valuations should be made every 12 months or at every round of funding.¹

1. The Balance

Question 27

What is a RSU and difference between stock option?

Accepted Answer

Stock options allow you to purchase shares in your company’s stocks at a predetermined price (i.e. strike price) for a limited number of years. Employers encourage employees to stay longer because there’s typically a vesting period before the options become exercisable. This means that you have to be employed for a certain amount of time before you can actually exercise (or buy) the stock you were granted.

Restricted stock units (RSUs) are the most common type of equity compensation and are typically offered after a private company goes public or reaches a more stable valuation. Like stock options, RSUs vest over time, but unlike stock options, you don’t have to buy them. As soon as they vest, they are no longer restricted and are treated exactly the same as if you had bought your company’s shares in the open market.¹

1. HBR

Question 28

What is Forge’s minimum transaction amount?

Accepted Answer

In certain cases, Forge’s transaction minimum can be as low as $5,000 when investing through a Forge Fund (learn more here). Typically, however, the transaction minimum is $100,000 especially when investing in companies that are in high demand.

In competitive private markets, larger bids can strengthen your position by signaling demand and seriousness to potential sellers. This may improve your chances of matching, particularly in high-demand companies. Forge also supports partial fills, giving your order more flexibility to transact.

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