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Companies that issue stock options routinely enter what’s known as “blackout periods,” where they’re legally unable to issue new shares, and can ask employees not to exercise their stock options.

Companies enter blackout periods for various reasons. Typically, companies enter a blackout period because they’re in the midst of a corporate event that has the potential to materially change the value of their stock.

Private startups commonly enter blackout periods when they’re raising a new round of funding. Publicly traded companies typically enter blackout periods around funding announcements, mergers and acquisitions, or if they find themselves under investigation by securities regulators.

If you happen to start a job at a company while it’s in the middle of a blackout period, you might find that the company won’t issue you a stock options grant until after they’ve exited the blackout period.

It’s a similar story if you’re leaving your job while your company is in a blackout period — you might be legally prevented from exercising your employee stock options until the blackout period is complete.

Check with your stock options benefits administration team at work for clarification — in many cases, companies will voluntarily extend the post-termination stock option exercise window by however many days you find yourself in a blackout period, to give you time to exercise your options.

If you’re earning incentive stock options (ISOs), you have 90 days after you leave your job to exercise your ISOs or they’re automatically converted to non-qualified stock options (NSOs), which are taxed differently.

Note: Companies sometimes give employees advance notice that they’re about to enter a blackout period. If you’re earning stock options, it might make sense to exercise your stock options before the company enters its blackout period — particularly if you believe that the company’s fair market value will rise after it exits the blackout.

For example, a startup might tell its employees that it’s actively raising a new round of funding, and will soon enter a stock option blackout period. If the startup is successful, its fair market value could rise, making the total cost to exercise stock options higher.

Want to learn more about stock options? Check out our educational resources at Secfi Learn.