@The Accountant , it pains me, but I have to disagree with you.
It is better for Kimbal to avoid exercising his options for as long as possible if his goal is maximum return.
While it seems counterintuitive, the reality is that one gets a larger net return and higher percentage retention by delaying exercise even though one ultimately pays more dollars in tax.
What it boils down to is that the amount one pays in tax on inital exercise no long gains value nor does the cost basis. Further, the returns from the remaining balance will be taxed again. The result is that there is less to grow and the options end up double taxed which the reset basis doesn't counteract.
Simple example spreadsheet:
options | 1000 | | | | | | |
short term tax | 41.50% | | | | | | |
long term tax | 28.30% | | | | | | |
exercise price | $70 | | | | | | |
| | | | | | | |
final price | $4,000 | | | | | | |
| | | | | | | |
| | | | | | | |
exercise price | $500 | $800 | $1,200 | $1,600 | $2,000 | $3,000 | $4,000 |
exercise cost | $70,000 | $70,000 | $70,000 | $70,000 | $70,000 | $70,000 | $70,000 |
gross value | $500,000 | $800,000 | $1,200,000 | $1,600,000 | $2,000,000 | $3,000,000 | $4,000,000 |
gain | $430,000 | $730,000 | $1,130,000 | $1,530,000 | $1,930,000 | $2,930,000 | $3,930,000 |
tax | $178,450 | $302,950 | $468,950 | $634,950 | $800,950 | $1,215,950 | $1,630,950 |
net value | $251,550 | $427,050 | $661,050 | $895,050 | $1,129,050 | $1,714,050 | $2,299,050 |
gain | 8 | 5 | 3.333333333 | 2.5 | 2 | 1.333333333 | 1 |
pretax value | $2,012,400 | $2,135,250 | $2,203,500 | $2,237,625 | $2,258,100 | $2,285,400 | $2,299,050 |
taxable | $1,760,850 | $1,708,200 | $1,542,450 | $1,342,575 | $1,129,050 | $571,350 | $0 |
tax | $498,321 | $483,421 | $436,513 | $379,949 | $319,521 | $161,692 | $0 |
net | $1,514,079 | $1,651,829 | $1,766,987 | $1,857,676 | $1,938,579 | $2,123,708 | $2,299,050 |
| | | | | | | |
total tax | $676,771 | $786,371 | $905,463 | $1,014,899 | $1,120,471 | $1,377,642 | $1,630,950 |
As to why now, it may be he wanted shares to donate to his Big Green charity.
Edit: fixed first column