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Many employees of S&S Air have shares of stock in the company because of an existing employee stock purchase plan. To sell the stock, the employees can tender their shares to be sold in the IPO at the offering price, or the employees can retain their stock and sell it in the secondary market after S&S Air goes public. What are the advantages and disadvantages of each option?

Sagot :

The advantage of option 1 is that there is flexibility of sale and it affords the  stockholders liquidity for their cash. The de-merit of going for option 1 is that they may not get value for the shares if after it goes live its value increase.

What is the advantage of keeping the shares till later?

As already indicated above, the value of the shares grows as the company grows, hence, this becomes a sort of investment for the holders. They can also get premium value for it when the company goes goes public.

However, if the shares does not do well in the stock market, they also have to bear that loss.

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