sean99
pfm Member
A colleague once told me of a friend of his who worked at ARM holdings back during the tech bubble who had shares in the company worth hundreds of thousands of pounds from the company SAYE scheme. When the shares matured, he sold them all and bought a selection of tech company shares.
The tech bubble then burst and with it the value of all of his newly purchased shares. He then received a six figure capital gains tax bill for the sale of the ARM Holdings shares. But of course, the tech shares he now owned were worthless.
I think it bankrupted the guy.
Similar stories from silicon valley, where I was working at the time. If you exercised stock options, even if you didn't sell them, you were liable for CGT on the difference between your option price (say $10c - $1) and the current stock price of the company, which might have been $20+ per share. Multiply by say 20k shares and you have an unrealized capital gain of $400k on which CGT is due. However if the share price collapses and you still haven't sold the shares you may have no way to pay your tax bill in year N, even though you'll have a massive capital LOSS in year N+1. Many got into trouble this way by exercising and then holding their shares (and not doing a same day sale).