Company stock/option IPO question

Discussion in 'Risk Management' started by indexer, Apr 30, 2010.

  1. indexer

    indexer

    Hypothetical question - say you work for a company and you have stock options. The company goes public, but you can't sell your stock for a 6 months lock-in period.

    However, hedge funds know this and heavily short the stock just before the 6 month date. As a result your stock may end up being worth nothing by the time you can sell it.

    Question is - can you hedge the stock or options that you own so as to lock in some profit before the six month unlock date? I know that you can take an opposite position, but can you use your locked up stock as collateral? Or, is there a better way I have not mentioned?

    I am thinking about all those people who lost money in 2000 because they could not unload their holdings in time before the market collapsed. I am trying to brush up my bubble-smarts.