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Ten Minute Guide to Employee Stock Option Purchase Plans by Ken Little

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Chapter 11. Options and the IPO

In this lesson, you will learn how employee stock options and initial public offerings work together.

Winning the Lottery

The story is a familiar one. A couple of people, usually under 30, have an idea for a new high-tech product or service. They toil away amid empty pizza boxes and soft-drink bottles. They work seven days a week, often sleeping at work.

The company is starved for cash and asks employees to take stock and options as all or a major part of their compensation. Then one day, the company goes public and many of the employees are now millionaires thanks to the stock and stock options.

This scene has played itself out too many times to be an isolated incident. Early employees of companies like Microsoft, ...

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