If I needed more proof that investing in your company stock is a bad idea, I got some last night over dinner. Shadox is (once again) traveling on business and last night I went out to dinner with some of my colleagues. It turns out that three of the five people sitting around the table are former stock option millionaires... yes, you heard right.
Two of my colleagues who are former Nortel Networks employees worked for the company when its stock was a Wall Street darling. At the time each of them owned stock options worth millions of Dollars on paper. My colleagues held onto their stock options while Nortel's stock price tanked. One of them still owns the stock, now worth dramatically less.
Another of my colleagues worked for a small private company which received an acquisition offer from a large tech firm. My colleague exercised a large number of stock options, which were anticipated to be worth millions. While the deal ultimately fell through, my friend only spent a few thousands of Dollars to exercise his options. All in all, a very smart bet.
If your stock options are worth millions of Dollars, or if you otherwise have a sizable investment in your own company's stock, do yourself a favor and sell, sell, sell...
For more about the perils of investing in your own company's stock, check out this previous post.