> How in the fk do you invest into startups with something that is not publicly traded anyway? Was PayPal over the counter? Why was it so cheap?*
He was one of the founders of Paypal. At that stage, the strike price of the shares would have been fractions of a cent. More importantly, the "fair market value" of the shares of a non-public company is what the board says it to be which pre-funding is whatever they choose. Post-funding, there's usually a floor set because outsiders (aka investors) have done some analysis.
Normal people pay X% tax on the difference between strike and FMV. (X varies based on a bunch of things.)
That's all Stock Options 101.
Normal people can take advantage of the situation by executing as soon as they have the strike price. That makes the difference $0 so any % of that is still zero. The risk is that the actual value of the shares could go to zero too.
The "loophole" with Thiel is doing it all with an IRA.. which legally anyone can do BUT it's complicated and requires a specific process.
I've followed RocketDollar the past few years because they help with that and document all of it properly.
He was one of the founders of Paypal. At that stage, the strike price of the shares would have been fractions of a cent. More importantly, the "fair market value" of the shares of a non-public company is what the board says it to be which pre-funding is whatever they choose. Post-funding, there's usually a floor set because outsiders (aka investors) have done some analysis.
Normal people pay X% tax on the difference between strike and FMV. (X varies based on a bunch of things.)
That's all Stock Options 101.
Normal people can take advantage of the situation by executing as soon as they have the strike price. That makes the difference $0 so any % of that is still zero. The risk is that the actual value of the shares could go to zero too.
The "loophole" with Thiel is doing it all with an IRA.. which legally anyone can do BUT it's complicated and requires a specific process.
I've followed RocketDollar the past few years because they help with that and document all of it properly.