Replies to post #319376 on Anavex Life Sciences Corp (AVXL)

[wildcard235]

"It's the exercising of options that can be taxable."

I wrote that exercising of employee stock options is a taxable event, so we are in agreement on that point.

I further agree that an exercise of employee stock options is not inherently good or bad, or a reflection of anything about the underlying company condition.

You wrote, "Option holders tend to exercise when they intend to sell," but they also tend to exercise when if they resign or are terminated, because the option will cease to exist after their employment ends.

So if our CFO is being replaced with someone more experienced, I think that is very likely why she is exercising her options, and I suspect that like most folks who exercise them for any reason, she had to sell some to cover the tax liability.

[abew4me]

You completely misquoted him. He didn't say it was "because of taxes". See below...


"When an employee exercises their stock options, it is a taxable event. It is very common for people to have to sell some of those shares in order to be able to pay the taxes."

[attilathehunt]

Perhaps she exercised her stock options and will dump the $4m on call options and make 400m in return.

We got this and she would know.

[Bourbon_on_my_cornflakes]

Options taxes IMHO

At the time the options are granted, there is no tax as the options are priced and granted based on the current stock price.

When the options are exercised with say a $4 strike price and a $24 stock price, you have a gain of $20 on the options, which is taxable at short term or ordinary income rates (virtually the same) and a new cost basis in the stock of $24.

Exercising an option is a purchase transaction, so the gain on the option is taxed at that time.

Any sales of the stock afterward will be short term gains for a year, LT gains after that. Assuming a sales price > $24.