Saw something interesting earlier this month when I noticed that the new board member exercised the newly granted rights immediately after receiving them. At first I thought it was going to be a bit of a power play at the AGM....but then I realised that the cut-off date for voting at the AGM had already passed.
Veeravalli did the same thing
Why not just let the rights hang on until the SP rises and then cash them out?
Hmmm...
Couldn't decide on a reason so I forgot about it.
Came up again today with Kondragunta - granted and immediately exercised.
So... I thinks to myself... Is this a tax play?
Seems like it might be.... if the stock is expecterd to rise before the year's end.
[Any tax expert feel free to weigh-in and correct me]
Seems that income tax needs to be paid on "taxable emplyment benefit" - the difference between the exercise price and the fair market value at time of exercise.
In many (most?) circumstances when I have seen options granted in TSXV companies, they just sit there until they expire unexercised.
But if you are confident that the price is going to only go up before they expire, the options should be exercised as close to the exercise price as possible.
Thoughts?
Reference:
https://www.blg.com/en/insights/2021/01/canadian-income-taxation-of-equity-compensation-and-income-tax-act-implications