The Bittersweet Reality of Cash Out Early: Tales from a Failed Company
Experiences with stock options and early cash out can be a double-edged sword, as shown in my journey with a company that went from a successful venture to a catastrophic failure. This story uncovers the emotional, financial, and ethical implications of cashing out at a hot company that subsequently 'flames out'.
Introduction to a Booming Company
My story began at a company that, up until the mid-80s to early 90s, was thriving and had around 1,000 employees. It was a place where loyalty was mutual, fostered by a robust and successful work environment.
Unfortunately, this era soon came to an end. In a sequence of events, the company's founders sold it to an inexperienced buyer, resulting in a lucrative windfall for the sellers. Despite this, the company continued to thrive, eventually being acquired by a major tool manufacturer, which again led to layoffs for me and other employees.
However, the twist came when my shares in the original company turned into shares in the acquiring company, doubling in value. Yet, this was a mere prelude to the story of my colleagues, who unfortunately did not heed the advice to cash out early.
The Enron Experience
Jumping forward a few years, my experience with the Enron Communication IPO in 1999 adds another layer of financial complexity. Upon the IPO being pulled, we were issued 2B shares at a valuation and paid out accordingly. This payout involved a mix of cash, options, and restricted stock units (RSUs).
With limited financial education, I opted to keep my money invested, modifying a spreadsheet to track potential exit strategies based on stock price. Tragically, I would soon realize the importance of timely decision-making and diversified investment.
Leaving Enron Amidst Uncertainty
In January 2000, during the annual Enron stock analyst conference, I was blindsided by the realities of the company's direction. Misleading presentations and a sinking feeling prompted me to resign. Financially, I had the opportunity to delay my exit due to bonuses and future vesting shares, but my moral compass guided me to act sooner rather than linger.
Leaving Enron was a challenging decision, not just for myself but also for my team. Despite pleas and offers to return, I insisted on consulting agreements, allowing me to continue work without the burden of company affiliation.
The Aftermath and Lessons Learned
Following my exit, I urged my former team to cash out, emphasizing the importance of diversifying their financial risks. However, the very tools I had created to assist them—spreadsheets showing the increasing value of Enron stock—ultimately led many to delay taking profits, believing the stock would continue to rise.
By August 2001, Enron's stock had plummeted, with many employees losing all their vested options and other investments. The story serves as a stark warning to those who rely solely on a single company's success for their financial future.
Even today, over 15 years later, I maintain connections with former colleagues, where we can both laugh and reminisce about the past. However, a lingering tension remains between those who left early and those who stayed too long, unable to cash out in time.
My advice to anyone navigating the business world is to always have a plan B, diversify your investments, and never forget the importance of ethical decision-making in our professional lives.