Your Stock Options Are About to Pay Out - Are You Ready?

May 15, 2026Salary6 min read

Every software engineer who receives a stock option offer has the same question: "When does it actually become money?" The vesting schedule fills up, the cliff passes, options accumulate in your account. But if the company isn't public yet, you can't sell the shares on the open market. The value is there - just not in your hands.

That's where a liquidity event comes in. A company acquisition, an IPO, or secondary transactions that allow shareholders to receive cash. When one of these moments arrives, you need to know what you have - and be prepared.

What Is a Liquidity Event?

For your company shares to become real money, a buyer has to appear. This happens in three forms:

Acquisition: Another company buys yours. The most common path to liquidity. Depending on the deal structure, employees may receive cash, a share swap, or a combination.

IPO (Initial Public Offering): The company goes public on a stock exchange. Shares now trade on the market. But most employees face a "lock-up period" - typically 6 to 12 months. You can't sell during that window.

Secondary Sale: Some large private companies allow employees to sell existing shares to existing investors or private buyers. Not universally available, but increasingly seen in high-growth startups in Türkiye in recent years.

What Happens to Your Options in an Acquisition?

An acquisition is the most critical moment for your options. What happens depends on your contract and the deal:

Options are cashed out: The acquiring company buys existing options at the deal price per share. The cleanest scenario: you receive the spread between your exercise price and the deal price. If your exercise price is ₺1 and the company was acquired at ₺20, you receive ₺19 × number of options.

Options are assumed: The acquirer converts options into their own equity plan. Vesting continues, but now tied to the acquirer's stock. Your outcome is tied to the acquirer's performance going forward.

Options are cancelled: Typically happens with "underwater" options - when the exercise price exceeds the deal price. In that case, the option is worthless and may be cancelled outright.

Read your contract before this moment arrives. Look for the clause titled "Change of Control" or "Merger" to understand which scenario applies to you.

The Lock-Up Period Reality After an IPO

When an IPO is announced, the first instinct is to open your brokerage and sell. But most employees can't - because of the lock-up period.

The standard lock-up is 180 days. Some companies set it at 90 days, others at up to 360. You can't sell during this window.

Why the lock-up matters:

IPO prices are typically elevated. Speculative demand inflates valuations. When the lock-up expires and employees begin selling, prices can drop sharply. Market volatility around lock-up expiry dates is normal.

What you can do:

Read your offer letter and equity agreement to know your exact lock-up end date.
When you're ready to sell, go gradual - spread sales across months rather than exiting the full position in a single day.
Consult a tax advisor about timing: corporate employees may face "blackout windows" during which selling is restricted due to material non-public information.

Tax: For Employees Based in Türkiye

Tax can come into play at two points with stock options:

When you exercise: If you exercise your options after vesting (i.e., you purchase company shares), the difference between the exercise price and fair market value may be treated as employment income. Income tax may be due on that spread.

When you sell: When you later sell the shares, any gain over your exercise price may be subject to capital gains tax. In Türkiye, the applicable rate can vary based on how long you held the shares.

If you're receiving shares from a foreign company, the situation is more complex: the country's withholding rules, Türkiye's tax treaty network, and foreign account reporting obligations all come into play. A tax advisor genuinely pays for themselves here.

Practical warning: "I don't need to report this, the company is foreign" is a common misconception. If you're resident in Türkiye, you're required to declare worldwide income.

Should You Exercise Before the Liquidity Event?

Before the liquidity event arrives, you face a decision: should you exercise your options early and own shares outright?

Exercising while the company is still private means a cash outlay. You pay the exercise price to the company but can't sell. So you're taking two risks: cash out of pocket + illiquidity.

Early exercise scenario: Some companies allow "early exercise" - exercising before vesting. The advantage: if you exercise when the company's value is low, your tax basis is low too, reducing future tax liability. The disadvantage: upfront cash required.

Wait-and-see scenario: Let vesting complete, wait for the liquidity event, then exercise and immediately sell. Lowest risk posture, but potentially the highest tax outcome.

If you're leaving the company, there's additional time pressure: most agreements give you 90 days after departure to exercise or forfeit. Missing that 90-day window means losing years of accumulated vesting.

The First Clause to Read in an Acquisition: Liquidation Preference

Not everyone wins equally when a company is acquired. Investors with "liquidation preference" get paid before employees.

Example: The company sells for $100 million. Investors have a 1× liquidation preference and put in $80 million total. They take $80 million first, leaving $20 million to split between employees and founders.

You can't fully know this without seeing the cap table. But you can ask questions:

Do existing investment rounds carry liquidation preferences?
Are employee options participating or non-participating in the latest valuation?
Are there any anti-dilution provisions in place?

You may not get direct answers. But knowing what to ask helps you better understand what you actually hold.

Preparation: Before the Liquidity Event Arrives

It comes without warning - but preparation can happen in advance:

Gather your documents: Do you have your offer letter, equity agreement, vesting schedule, and exercise price in writing? Are they stored digitally?

Track your current position: How many options have vested? How many haven't? You should be able to see this on your company's equity portal (platforms like Carta, Pulley, or Shareworks).

Understand your tax situation: What is your exercise price? What was the company's last known valuation? The larger the spread between those two numbers, the more material your potential tax burden.

Make a cash plan: If exercising requires cash, where will you get it? Without a plan, you face a liquidity crunch at exactly the wrong moment.

The Package Is a Promise Until It's Cash

Stock options become yours on the vesting date. But until they're converted to cash, they have no economic reality. Engineers sometimes think "I have equity in a $10 million company." That equity stays a number until an actual acquisition or IPO occurs.

That's why you shouldn't treat a stock package as equivalent to cash compensation when evaluating a job offer. As we covered in the stock option and ESOP guide, a conservative valuation applies a probability discount based on the company's stage.

But when the moment finally arrives - when the company is sold or goes public - come back to this guide. Read the contract, sell gradually, get expert tax advice. The moment you've waited years for can go as hoped, or a few panicked decisions can cost you half of it.

To deepen your total compensation thinking, also visit the total compensation guide.