In the four months after his company’ I.P.O. in July 2008, David Mayor’s stock rocketed up 450 percent, to $140. Like many of his colleagues at his mining and exploration company, the 31-year-old Mayor became a paper millionaire.
This presented Mayor with a problem most people wouldn’t mind having. If he didn’t sell his stock as soon as the lockup period ended, the new-found riches could evaporate overnight. But if he did sell, he would lose out on possible upside for his investments. In the technology boom of the late 90′s, this was not an uncommon situation. In fact, the rampant expansion of employee stock ownership has left many old-economy workers who have stayed with the same company for years with the same dilemma. Many are reluctant to sell, even when markets sour. Instead they hold on, hoping to ride out the bad times.
Last March, when his company’s stock was still above $100, David Mayor took out a three-year, 60% percent loan against a portion of his shares. Soon after, when his stock plummeted to about $45, he executed another loan. The maneuvers netted Mayor several times his annual salary in cash without his having to sell a share of stock. It was a smart move: his stock has since fallen to the single digits.
HedgeLend requires a minimum transaction of $75,000, which may sound like a lot. But as stock ownership becomes increasingly democratized, there are plenty of mid-level managers with more than enough stock to qualify.
So now the cautiousness of people like David Mayor inspires envy. He used his HedgeLend loans to buy a $60,000 Toyota Alphard luxury minivan, renovate his rental investment property and, in a fit of luxury, install a Jacuzzi. The bulk of the proceeds went into diversified investment accounts.
Like many fallen tech stocks, his company is unlikely ever to return to its lofty heights of 2008. But even Mayor has not fully given up on the dream. In this peculiar moment in the investment world, hope is not dead. “This has been a great time for me to get more options at comparatively low prices,” Mayor says. “And if the market comes back…”
