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Technology Stocks : VALENCE TECHNOLOGY (VLNC)
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To: Larry Brubaker who wrote (2089)2/10/1998 4:48:00 PM
From: I. N. Vester  Read Replies (1) of 27311
 
CR calculations: AMT may make it optimal for him
to raise cash and exercise ASAP, rather than wait!

Incentive stock options are subject to AMT due
the year of exercise on the 'bonus value',
i.e current market - exercise price. This is
true even if you hold the stock and don't sell it.
(unless you had the opportunity to file a section
83b exclusion when granted, which very few
people are even aware of).

AMT concerns could actually be a BIG motivation
for him to exercise now ASAP, at the lowest possible
price. If he holds the shares, he can
turn cap gains from now forward into
long term gains. But he'll get hit for AMT this
year on the bonus value at time of exercise.
If he exercises at 4.50 that liability is far
less than if the price gets to $8-10 before he
exercises the options (even if he KNOWS it will
get close to that very shortly).

That's a real big hit - 40% due this year, verses
far less defered until he sells.

So i think he's had a balancing act between
waiting to sell his shares as long as possible to
get a higher price, and selling asap to exercise the
remaining options asap and have the lowest possible
1998 AMT liability.

I think we know which way his accountant told
him to go....At least this is a large consideration
unique to his situation!
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