Anavex Life Sciences Corp (AVXL)

[ALP7]

There are tax complications with stock options. I am not a CPA and anyone who is going to exercise options needs to talk to a tax professional. My last employer before I retired was bought out and my options all vested and were exercised and sold so I'm slightly familiar with the topic.

Are the options ISO or Non-statutory? Most likely ISO. If they are ISO, it is incorrect to assume that the only cost is the strike price. There is an AMT tax that will be triggered. If Missling exercises the options when the stock is at 9.60, then he'll have a "paper profit" of 9.60 - 1.60 x 500,000 = $4,000,000. Since AMT also excludes normal deductions like state and local taxes, the 28% rate is effectively higher than that. So he might be faced with a $1.2 M federal tax bill in addition to paying the exercise price. I don't know if NY state also taxes those "paper profits". If he sells any stock within a year of exercise those proceeds become ordinary income.

If the options are non-statutory, then the $4M is ordinary income. Which in his case, with NYC, NY State and Federal taxes, his rate might be well over 60%.

I'd be very surprised if he didn't sell at least 300,000 shares. Might even sell all of them. The shorts will of course spin this as something more than tax management even though Missling still has over 4 million more options. Expect to see some negative headlines.

Good info here: https://www.chase.com/personal/investments/learning-and-insights/article/incentive-stock-options-and-the-amt