Solstice Robotics: Three Inboxes and a Tender Offer
The Private Firm CFO · Case 2 · Mon Oct 5, 2026 · Prof. Barrios
This is the projected class discussion. Click any card to reveal it, or press → to step through. For open-ended what-ifs, switch to Explore.
Three people got the same email about the same $9.00. Their tax bills differ by six figures.
The class voted on phones twice: before any math, and again after the case. All three sections combined:
Opening vote — 71 votes
Closing vote, same question — 45 votes
45 of the 71 re-voted, so compare shares, not raw counts.
The three prices
0:05–0:13
What investors paid for stock plus preferences — a 1× non-participating liquidation preference and board rights. Not the price of common.
A negotiated clearing price for common today. Real, but one-time and capped.
The defensible fair market value of common. Sets option strike prices; the tax law's reference point at exercise.
Everything in this case is: which number does the tax law use, and when?
The persona matrix
fills through 0:13–0:58
Maya: the AMT worksheet
0:13–0:30
Tax at 40% (35% federal + 5% state) = $87,500
Net cash = $225,000 − $6,250 strike − $87,500 = $131,250
No withholding came out — the bill arrives in April.
Exercise-and-hold the other 75,000: step through the worksheet
AMT is (mostly) a prepayment: it becomes a credit against future regular tax, and selling in the same calendar year erases the adjustment entirely.
Ben: the $20,000 form
0:30–0:44
| Sell 20,000 in May 2026 | Wait past Mar 15, 2027 | |
|---|---|---|
| Proceeds | $180,000 | $180,000 (at the same $9.00) |
| Gain (basis $5,000) | $175,000 | $175,000 |
| Tax | 28.8% combined = $50,400 | federal $0 (§1202) + state $8,750 |
| Net | $129,600 | $171,250 |
His stock is pre-July-4-2025 QSBS: 5-year cliff, 100% exclusion, $10M cap, $50M asset test met at issuance ($14M in March 2022). No partial exclusion at 4.2 years — the cliff is a cliff.
Waiting saves $41,650 — 24% of the gain — for about ten months of illiquidity.
Had Ben never early-exercised, at a hypothetical $20 IPO his path is all-ordinary — roughly $632,000 of tax — versus his actual QSBS path of roughly $79,000. The $20,000 form was worth about $553,000.
Sofia: the 90-day clock
0:44–0:58
Withheld at 29.35% (22% federal supplemental + 2.35% Medicare + 5% state) = $22,893
Net cash = $90,000 − $12,000 strike − $22,893 = $55,107
True tax at 42.35% = $33,033 → another $10,140 due in April
Withholding is not the tax. It is a deposit; her marginal rate is 42.35%.
Cash needed = $36,000 strike + $24,654 withholding = $60,654
Full-year tax on this leg = 42.35% × $84,000 = $35,574 — withholding covers $24,654, so $10,920 more arrives with the April return
Walking away entirely forfeits all 40,000 vested options — $312,000 of intrinsic value at the $9.00 print ($112,000 at the $4.00 409A). After tendering 10,000, the amount still at stake is the remaining 30,000: $234,000 at $9.00, $84,000 at $4.00. Pretax, illiquid value — but real.
- Sell 10,000 + exercise 30,000: short $5,547 at the June deadline; with both April filing balances ($10,140 + $10,920) the all-in gap is $26,607. Keeps 30,000 shares, and the capital-gains clock starts.
- Sell 10,000 only: +$55,107 now; forfeits the remaining 30,000 — $234,000 of intrinsic value at $9.00.
- Do nothing: $0, and all 40,000 vested options die on June 29 — $312,000.
The CFO's ledger
0:58–1:12
Planning mix for the full 1,000,000-share tender: 40% NQSO exercise-and-sells @ $1.20 average strike · 35% ISO same-day sells @ $0.25 · 25% long-held common.
In (to Solstice)
ISO same-day (disqualifying) spreads: ($9.00 − $0.25) × 350,000 = $3.06M (rounded)
Long-held common: $0
Worth ≈ $1.3M at 21% — someday. Solstice is an NOL company; the deduction joins a $110M carryforward.
Out / obligations
$915,720 on the NQSO legs (29.35% of $3.12M) — and at Solstice's deposit size, the federal employment-tax deposit is due the next business day after settlement.
1.45% of the $3.12M of NQSO compensation — the company's own cash cost, on top of remitting employees' withholding.
ISO same-day sales carry no withholding at all — employees must cover the tax themselves in April. The FAQ must say so.
Three policy questions for the board
Three months after termination an ISO becomes an NQSO by statute, whatever the plan says. And an extension is an ASC 718 modification, with incremental expense.
A real secondary print is evidence. Expect the next common FMV in the $4.50–$6.00 range — so grant any planned refreshes before the evidence accumulates.
Takeaways
1:12–1:20
Exercise-now-and-hold beats never-exercising by roughly $166,000 at a hypothetical $20 exit — and the QSBS door that closed (an exercise back before mid-2023) would have been worth about $518,000.
The $20,000 form: about $553,000. The ten-month wait he is weighing now: $41,650.
Doing nothing costs $234,000 on the 30,000 she could still keep — found on page six, on a Saturday night, 84 days before the deadline.
Five choices, each worth five or six figures, on a $9.0 million tender — overlapping alternatives, hypothetical exits, and illiquid value, so they do not add to one number. What they share: none was set by the exit.
None of this was set the day the money arrived — it was set the day somebody did, or didn't, sign a form. The CFO's job is making sure nobody finds that out too late.
Parking lot: call your tax attorney
Edge cases parked to protect the clock. Per section.
Explore the machinery
The class discussion used fixed numbers. These calculators run the same machinery on inputs you choose — the transferable part. All rates are the case's simplified tax card, not real-world parameters.
E1 — The AMT explorer
Machinery: bargain-element add-back → AMTI → $90,000 exemption phased out $0.50 per $1 of AMTI over $500,000 → 26% / 28% tentative → AMT = excess over regular tax. ISO exercise-and-hold only.
E2 — Sell now vs. wait: the QSBS clock
Ben's shares: basis $0.25, bought March 15, 2022 with the 83(b). Pre-July-4-2025 QSBS: 5-year cliff, 100% federal exclusion, $10M cap, $50M asset test met at issuance. The state's 5% applies even to excluded gain.
A buyer still exists next March (the tender is a one-time window); the price holds; and he can keep his whole net worth in one private stock for ten more months without losing sleep.
Had Ben never early-exercised, at a hypothetical $20 IPO his path is all-ordinary — roughly $632,000 of tax versus roughly $79,000 on his actual QSBS path. The form was worth about $553,000. (Static by design: those path assumptions are narrative, not derivable from the tax card.)
E3 — Sofia's bridge
40,000 vested NQSOs @ $1.20; tender cap 10,000 (25% of vested); window ends June 29. Withholding stack 29.35%; true marginal rate 42.35%. The exercise leg withholds at the $4.00 409A — that is what payroll uses; the $4/$9 choice belongs to ISO holders, not here.
E4 — The CFO's ledger: tender-mix explorer
1,000,000 shares at $9.00. Average strikes: NQSO $1.20, ISO $0.25. NQSO spreads carry the 29.35% withholding stack and 1.45% employer Medicare; ISO same-day sales carry none; long-held common generates no deduction.
Common wrong turns
Each card front is a tempting mistake. Click for why it fails and the right number.
What to study
- Character is chosen, not given. The same $9.00 produced ordinary-with-withholding (Sofia), ordinary-without-withholding (Maya's same-day ISO sale), and capital-gain-heading-to-zero (Ben) — fixed by grant type, elections, and clocks set long before liquidity.
- The five-line AMT worksheet, cold. Add-back → AMTI → exemption with the phaseout → 26%/28% tentative → excess over regular tax. Know the ~42% shadow bracket in the phaseout band, the credit, and the same-year-sale escape.
- Two clocks start at exercise — none while you wait. The one-year capital-gains clock and the QSBS holding period both run from exercise, and the QSBS asset test is applied at exercise too.
- Withholding is not the tax. 29.35% withheld against a 42.35% true rate; ISO events withhold nothing at all; phantom income on an illiquid exercise has to be funded with real cash.
- The deductibility asymmetry. NQSO spreads and same-day ISO sales are deductible compensation to the company; qualifying ISO gains and long-held shares give it nothing.
- Plan design is tax policy. 90-day windows, the three-month ISO statute, early-exercise availability, and 409A discipline after a secondary print are CFO levers — each with a named payer. Forfeiture of unvested awards reverses recognized expense; vested expiry reverses nothing; extensions are modifications.
- The final exam will not retest Solstice's facts. It will hand you a new grant history and a liquidity event and expect the machinery above run on it — the decision tree with dollars attached.
None of this was set the day the money arrived — it was set the day somebody did, or didn't, sign a form.