This article explains how to exercise stock options. To learn more about stock options in general, check out our Equity 101 article.
Exercising Options
To exercise options, first, click on My Equity to view your available grants. Grants with an Exercise Now button have options available for exercise. Here’s what will happen:
- Select the number of shares you want to exercise.
- Sign the Exercise Documents and secure spousal consent (if applicable).
- Pay for your shares.
- Use the system to submit the documents for approval.
- A company representative will approve the documents.
- The Secretary and President will sign the electronic common stock certificate.
If you exercised unvested shares (early exercise), don’t forget to consider filing an 83(b) with the IRS within 30 days of purchasing the equity. You can access the workflow for completing your 83(b) on the transaction table next to the eligible grant.
What You’ll Need to Know
Here are some of the topics you’ll need to make decisions about before you exercise your options:
- Which grant to exercise: If you have several grants, you’ll need to pay attention to which grant you want to exercise. Different grants may have different vesting schedules and exercise prices. There may be tax consequences based on which grants you exercise. If you have any questions, you should talk to your attorney or tax advisor.
-
Number of shares: You can exercise any portion of your eligible shares. The system will assist you with the math, but you can use the formula below to plan ahead. The exercise price can be found in your ISO/NQO Grant and Agreement.
- Number of shares × Exercise price = Purchase price
Documents
Below is a sampling of the documents that may be generated in the Exercise Options workflow. Note that the documents vary based on whether or not the exercise includes unvested shares.
Exercise Vested Shares
Option Exercise
Contractual agreement for the purchase of stock in the company at the exercise price. The document includes any limitations regarding the resale, transfer, and distribution of the shares.
Electronic Stock Certificate
The electronic stock certificate is evidence of your purchase of the company's stock. You can always find your stock certificates—and all of your equity-related documentation—in My Documents on your My Workspace page.
Exercise Unvested Shares (Early Exercise)
Option Exercise and Restriction Agreement
Contractual agreement for the purchase of stock in the company at the exercise price. The document includes any limitations regarding the resale, transfer, and distribution of the shares. Further, the Restriction Agreement describes the terms under which unvested stock may be repurchased from the grantee.
Stock Power (in blank)
In accordance with the Restriction Agreement, purchased, unvested shares are subject to repurchase by the company under certain circumstances. The Stock Power is a blank, signed document, completed by the company at the time of the stock repurchase.
Electronic Stock Certificate
The electronic stock certificate is evidence of your purchase of the company's stock. You can always find your stock certificates—and all of your equity-related documentation—in My Documents on your My Workspace dashboard.
Filing your 83(b)
If you exercise unvested options, you should consider making an election under Section 83(b) of the Internal Revenue Code. Filing an 83(b) can have important tax consequences. You should consult a tax advisor as to the advisability of making the Section 83(b) election.
The system will assist you with filing your election using the File 83(b) workflow. Grants that are eligible for the election will have a "File 83(b)" option next to the appropriate grant on your equity transaction table. It is YOUR decision whether to file an 83(b), and although the system will make a cover letter and a Section 83(b) election form for you, only you can legally file the form. More information on 83(b) elections is available in IRS Publication 525, on the IRS website.
It is important to note the following: if you decide to make the election, you only have 30 days from the date you purchased the equity to file with the IRS. After you file the 83(b), you will receive proof of your filing from the IRS. Upload the proof of filing to provide your company with evidence of your election, and complete the workflow.
FAQs
Can I log into Fidelity Private Shares even if I've been terminated? Yes. This is why the system asks not only for your work email, but also for your personal email. This way you can login to the system even after you lose access to your work email as a result of your termination.
Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.
© 2024 FMR LLC. All rights reserved.
1094096.1.0