On June 29, Blue Apron, trading on the NYSE as APRN, went public in a much-anticipated IPO. The results, however, have not been great. After initially targeting an offering price of $15-$17, Blue Apron dropped the price to $10 before the IPO, and the price has subsequently fallen even further, closing at $7.14 on July 11.
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Given a valuation much lower than originally anticipated, there are a couple variables to consider in determining the proper plan of action in exercising or selling your stock options. Employees are subject to a blackout period for selling shares, which will end 6-months after the IPO in most cases. Given that no selling can happen in the short-term but exercising can happen, it presents a planning opportunity if you feel good about the long-term price potential of the Blue Apron stock.
- Consideration #1 – I’ve Already Exercised My Blue Apron Stock Options Weeks before the IPO
This one could be a bit tricky. If the 409(a) valuation was higher than the current stock price when you exercised, you could be paying some extra alternative minimum tax (AMT) if you hold the shares through the end of the year, and have to file and pay AMT for 2017. Given the IPO date, you may have the opportunity to sell shares before 12/31, then AMT considerations are eliminated with a disqualifying disposition. The higher valuation that was in place when you exercised become a moot point. If the price is still depressed at the end of December and you can sell, you may want to do this – the numbers and data will tell you the right approach. Effectively you should have a “price” you would plan to sell these exercised options given a lower value than when you exercised.
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There is also the potential that the price adjustment to $10 is retroactive and your pre-IPO exercise is subject to that valuation. This is a question you will need to ask your Blue Apron HR team directly.
- Consideration #2 – I Haven’t Exercised My Blue Apron Stock Options Yet
With the price in the low $9’s – if you exercised an option – you would only be subject to AMT on the spread between your option price and the current trading value. If you have a positive impression of the long-term value of the stock, you may want to consider exercising while you believe the price is “low”. This would create a significant long-term value for you if the price did rebound to $15 or even went to $20.
If you don’t feel great about the stock, you may want to wait a bit longer to exercise to potentially capture an even lower price.
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