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<p>[QUOTE="Shoham, post: 5193098, member: 27963"]<b>Option Valuation</b></p><p><br /></p><p><br /></p><p><br /></p><p>Hello:</p><p><br /></p><p>The math is easy, the tax decisions less so.</p><p><br /></p><p>Each option give you the right to buy one share for $88. Since the share is now trading around $163, this makes each option, today, worth about $75. If the Valeant deal goes through, the value of each share would be whatever Valeant is trading for it. As the offer stands today, Valeant is offering $72 case + 0.83 Valeant shares. With Valeant shares currently trading at about $115, the value of the offer is about $167 (not hugely different from the current trading price of Allergan). So, if you exercised and sold today, you will net (pretax) about $75K. If you did it after the deal (as currently offered) closes and Valeant share price is the same then as now, then about $79K.</p><p><br /></p><p>While the mechanics of the transaction will depend on how the various agreements are written, in all likelihood, the monetization of your options will happen in a manner that is financially equivalent to you exercising your option just before the transaction and then receiving the trade-in value ($72 cash + 0.83 Valeant shares) immediately afterward. If you do not have, or wish to commit $88K (the amount required to exercise all your options), most broker houses offer a "cashless" exercise service (for a few pennies per share, they lend you the $88K to exercise the option, then they immediately sell the obtained share, recovering their $88K loan from the proceeds, and giving you the rest -- their loan lasts for all of a fraction of a second).</p><p><br /></p><p>Allow me to interject here that you absolutely need to speak with a tax professional or financial planner very soon. I do not have the information or skills to provide individualized advise. There are huge tax implications with regards to exercising that many options, and these may amount to thousands (maybe tens of thousands) of dollars difference between doing things intelligently or haphazardly. It may throw you into a higher tax bracket where you start losing many deductions and/or trigger a nasty intrusion of the Alternative Minimum Tax. It might be too late to try to position some of your gains as long term capital gains (with a much lower tax rate), but maybe a savvy tax planner will see a way of doing it. Also, there may be some play to split the exercising between 2014 and 2015 to reduce the tax impact. I can go on speculating about your tax situation for a long time, but I think you see the point. This is really a time to shell out a few bucks and get a professional to develop your tax strategy.</p><p><br /></p><p>Dan.[/QUOTE]</p><p><br /></p>
[QUOTE="Shoham, post: 5193098, member: 27963"][b]Option Valuation[/b] Hello: The math is easy, the tax decisions less so. Each option give you the right to buy one share for $88. Since the share is now trading around $163, this makes each option, today, worth about $75. If the Valeant deal goes through, the value of each share would be whatever Valeant is trading for it. As the offer stands today, Valeant is offering $72 case + 0.83 Valeant shares. With Valeant shares currently trading at about $115, the value of the offer is about $167 (not hugely different from the current trading price of Allergan). So, if you exercised and sold today, you will net (pretax) about $75K. If you did it after the deal (as currently offered) closes and Valeant share price is the same then as now, then about $79K. While the mechanics of the transaction will depend on how the various agreements are written, in all likelihood, the monetization of your options will happen in a manner that is financially equivalent to you exercising your option just before the transaction and then receiving the trade-in value ($72 cash + 0.83 Valeant shares) immediately afterward. If you do not have, or wish to commit $88K (the amount required to exercise all your options), most broker houses offer a "cashless" exercise service (for a few pennies per share, they lend you the $88K to exercise the option, then they immediately sell the obtained share, recovering their $88K loan from the proceeds, and giving you the rest -- their loan lasts for all of a fraction of a second). Allow me to interject here that you absolutely need to speak with a tax professional or financial planner very soon. I do not have the information or skills to provide individualized advise. There are huge tax implications with regards to exercising that many options, and these may amount to thousands (maybe tens of thousands) of dollars difference between doing things intelligently or haphazardly. It may throw you into a higher tax bracket where you start losing many deductions and/or trigger a nasty intrusion of the Alternative Minimum Tax. It might be too late to try to position some of your gains as long term capital gains (with a much lower tax rate), but maybe a savvy tax planner will see a way of doing it. Also, there may be some play to split the exercising between 2014 and 2015 to reduce the tax impact. I can go on speculating about your tax situation for a long time, but I think you see the point. This is really a time to shell out a few bucks and get a professional to develop your tax strategy. Dan.[/QUOTE]
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Cafepharma Message Boards | Pharma Sales, Device Sales, Lab Sales
Home
Forums
>
Pharma/Biotech Companies
>
Allergan
>
Glossary of Hostile Takeover Terms with Discussion
>
Cafepharma Message Boards | Pharma Sales, Device Sales, Lab Sales
Home
Forums
>
Pharma/Biotech Companies
>
Allergan
>
Glossary of Hostile Takeover Terms with Discussion
>