Dilution Report (Public Markets)

What’s new? 

Public company administrators can now run a Dilution Report to help them calculate their company’s diluted earnings per share (EPS). The Dilution Report will contain the simple and weighted average of common stock outstanding (WASO), the number of incremental shares, the average trading price for common shares, and supporting information for all calculations. This feature will simplify diluted EPS calculations and help public companies meet their diluted EPS reporting requirement for their quarterly income statements.  

How does it work?

To calculate diluted EPS, an Issuer will need the WASO and shares outstanding (new common shares issued at conversion - repurchased shares) for the reporting period in question. The Issuer will calculate its own net income, preferred dividends, and after-tax cost of interest. 

Note: * denotes fields not provided by Carta

After logging into their Carta accounts, public company administrators can navigate to the Financial Reporting section of their profile to generate a new Dilution Report for a desired reporting period. Dilution reports are only available for periods that begin on or after an Issuer’s IPO date.


After the report is generated, the administrator can download an Excel file which includes calculated values for simple and weighted average of common shares outstanding, the number of incremental shares, the average trading price for common shares, and supporting information. The file also includes an “Errors” tab to flag any data issues that should be resolved to produce an accurate report.

Simplify diluted earnings per share calculations to meet quarterly reporting requirements for public companies

With the Dilution Report, public company administrators can:

  • Save time and reduce the work required to calculate WASO and shares outstanding to meet public company reporting requirements;
  • Customize the diluted EPS reporting period as needed;
  • Use Carta’s calculations to verify their own calculations as a sanity check; and
  • Understand if there are any data discrepancies that need to be addressed. 


Start using the Dilution Report now!

Do you need additional help in using the Dilution Report? Reach out to Carta’s Financial Reporting team at 718@carta.com

Wire Instructions Update

What’s New

We have made UI improvements to our Wire Instructions for online wire exercises. The new UI better highlights the amount, timeline, and considerations for completing the transfer. The updates include:

  • User and exercise specific details such as grant, company, option holder, date, and amount.
  • Clearer instructions for the bank on how to handle intermediary fees with specific SWIFT payment instructions. 
  • Approval and reminder emails now show the last day for Carta to receive funds, so the exercise can be complete.

Who this affects

All international users who are exercising options via online wire. 

How it works

The updated Wire Instructions will be available in the same places as before (Tasks view, PDF, Exercise Progress view). You can see the new templates here:

Tasks view


PDF

Exercise Progress view

Email communication

Both Approval and Reminder emails show the date for Carta to receive funds.

Timing

  • Available on all online wire exercises starting 11/30/2022

Additional Resources

Support Article: Exercising Via Online Wire

Communication Center (Public Markets)

What's new?

Public company administrators can now utilize the brand new Communication Center to send secure communications to stakeholders in the company’s equity plan managed on Carta. This feature allows public companies to create and send timely communications to equity plan members in bulk. Recipients can be selected by relationship type and other filters to further customize the message’s distribution list. In addition, the Communication Center dashboard allows company administrators to view sent and drafted messages, and see which stakeholders have viewed a communication. 

Examples of communications include, but are not limited to: instructions on how stakeholders can manage their equity at Carta, employee stock purchase plan (ESPP) offerings, upcoming trading windows, and updated disclosures.

How does this work?

Permissioned company administrators may access the Communication Center. Before sending any messages, company administrators should check that the company’s Stakeholder Ledger is up-to-date to ensure messages are sent to the correct individuals. At minimum, an individual’s Relationship, Contact Email, and Officer Code (if applicable) should be updated.

Once these steps are completed, company administrators can proceed to the Communication Center dashboard (found under the Employee tab of the main navigation toolbar).

Here, company administrators with Company Editor or Legal Administrator roles can compose, review, and send secure messages with or without PDF attachments. They can also filter for previously sent and drafted messages. 

When choosing who to send a communication to, the Company Editor or Legal Administrator may send bulk messages by Relationship Type (e.g., Employee, Ex-Employee, Advisor), and then also filter recipient lists by Officer Code, the employee stock purchasing plan (ESPP) an individual is a member of, or the security type(s) held by each stakeholder. 

Company administrators will have the opportunity to review the communication, save it as a draft, and reconfirm the recipients before sending the message. After sending the message, stakeholders will receive an email notification that they received the secure message. They must log in to their Carta accounts to view the message, and messages on the Carta platform may not be forwarded to an external email account.

Company administrators who can view the Communication Center dashboard can monitor which stakeholders have viewed the communication.  

Send secure messages and archive them safely in a centralized location with Carta’s Communication Center. 

The Communication Center allows public company administrators to: 

  • Craft and send secure communications with or without PDF attachments in bulk to stakeholders within their public equity plans; 
  • Easily create recipient lists by relationship type and other optional filters, removing the need to maintain multiple distribution lists manually;
  • Quickly filter recipient lists of sent communications by who has or has not viewed the communication; and
  • Review and archive communications to remain compliant with recordkeeping and reporting laws; 

Start using the Communication Center now!

Need help with the Communication Center? Refer to this support article for detailed instructions on how to manage, view, and send out your next secure message. 

SEC Rule 144 Affiliate Workflow Updates (Public Markets)

What’s new? 

Carta improved how public company administrators can manage and designate equity plan stakeholders as Rule 144 Affiliates. Designating stakeholders as Affiliates ensures that their trade orders get reviewed before execution through a separate SEC Rule 144 due diligence workflow and that those trades are properly captured for Form 144 inclusion. Company administrators can also now easily access and review a filtered list of Rule 144 Affiliates from their Company Summary page. 

The management of Rule 144 Affiliate status has been separated from the Officer Code workflow to simplify this process and to ensure trading blackout periods for stakeholders with certain Officer Code(s) will not be impacted by one’s Rule 144 Affiliate status.

How does it work?

Company administrators can update Rule 144 Affiliate status by clicking on “Manage Employees” on the Company Summary page. 

From there, administrators can click on each stakeholder’s record and view their current Rule 144 Affiliate status. Administrators can also track the Effective Date of when a stakeholder was first marked as an Affiliate without leveraging Officer Codes.

To designate an individual as a Rule 144 Affiliate, administrators can check the box within the Update Stakeholder flow:

For enhanced security, Carta put controls in place to prevent stakeholders from inadvertently being removed as an Affiliate. Please contact Carta Support to help remove a stakeholder’s Rule 144 Affiliate status.

Easily manage, review, and designate public equity plan stakeholders as Rule 144 Affiliates to ensure trading compliance via an improved workflow.

With the improved Rule 144 Affiliate workflow, company administrators can:

  • Easily manage, review, and designate equity plan stakeholders as Rule 144 Affiliates;
  • Be assured that Affiliate trades go through the proper reviews and are included on Form 144; and
  • Set blackout trading periods for certain Officer Code(s) without an impact to a stakeholder’s Rule 144 Affiliate status.

Start using the improved Rule 144 Affiliate status workflow now!

Do you want to update Rule 144 Affiliate status for individual stakeholders or in bulk? Refer to this support article for more information. 


Revenue Procedure 2002-50 (Company Tax and Compliance)

What's new?

Carta has made it easier for private companies running a tender offer to invoke IRS Revenue Procedure 2002-50, which is applicable to certain transactions involving the exercise of options and sale of the resulting securities during a transaction on the same day. This procedure allows for the exclusion of those same day option sales from Form 1099-B reporting if certain conditions are met. For example, this may apply to cashless exercised options in connection with a secondary transaction on Carta where there is no capital gain (Sale Price = Fair Market Value).

How does it work?

To make a Revenue Procedure 2002-50 election on an applicable transaction, company administrators may request an Officer Certificate template from Carta to complete and get signed by a Company Officer who has the authority to make decisions on the tax treatment of cashless exercises in a tender offer.

Fig 1: Sample of an Officer Certificate

The completed form can then be returned to Carta, who will then trigger the Revenue Procedure. 

Any employee whose transactions on Carta were excluded from 1099-B reporting as a result of Revenue Procedure 2002-50 will, if applicable, receive a supplemental Disclosure Statement detailing the fees and gross proceeds on cashless exercises of options so they can complete their Form 8949 reporting. Compensatory income from cashless exercises is reported as ordinary income on the W-2.  

This statement will be delivered electronically by February 15th of the following year in the same manner as all other tax documents on Carta. No such statement will be generated if the employee was not charged any fees by Carta.

Fig 2: Sample of IRS Revenue Procedure 2002-50 Disclosure Statement

The company administrator can also generate a new report of all the Disclosure Statements issued after the transaction. The Revenue Procedure Disclosure Statements Report will assist in auditing transactions ahead of the tax season to ensure completeness and accuracy for tax filing purposes. The report can be found under your Reports section in Carta.   

Fig 3: Sample of Disclosure Statements Report

Make tax reporting easier for same-day option exercises and sales during a tender offer by invoking Revenue Procedure 2002-50

The Revenue Procedure feature will:

  • Remove an employee’s burden to reconcile their Form 1099-B and Form W-2 when determining their Taxable Income after a same day option exercise and sale
  • Reduce the risk of paying capital gains tax on proceeds that were already taxed as ordinary income

Reach out to Carta to get the process started

Is your company running a tender offer? If so, the Revenue Procedure 2002-50 will be enabled on the platform after returning a completed and signed Officer Certificate to Carta. Companies who ran a tender offer previously in 2022 can retroactively upload the appropriate Officer Certificate to benefit from this feature until the end of 2022. Please contact your CSM or Liquidity representative for more information.


Updated Form 3921 Dashboard with Consolidated 3921 Statements (Company Tax & Compliance)

What's new?

After reviewing customer feedback, Carta made several user experience enhancements in the Form 3921 dashboard.

Carta now aggregates individual Form 3921’s for ISO exercises into consolidated statements for ease of use. Individual Copy B’s are still available to download if required. These statements will be available in participant portfolios when companies generate their 3921’s. 

The enhanced user experience also allows company stock administrators to download the Manage Stakeholder Details report to review all stakeholder records at once instead of in a paginated view within the Administrator Experience. Companies with 50+ stakeholders now have enhanced filter and sorting capabilities (e.g, select one or multiple years to download the Stakeholder details ledger) to better analyze historical data.

There is a new tab for “Exclude Transactions” for further flexibility if company administrators need to suppress reporting on individual option exercises. 

How does it work?

The new Form 3921 Dashboard is available now to all companies subscribed to this feature.

Reach out to Carta to get the process started

Reach out to your CSM to enable Form 3921 reporting if you are interested in upgrading your subscription. Public Market companies will have this enabled by default.


 

Payment Status Updates

What’s New

The Payment Status Updates on the Exercising workflow provides users a more accurate reflection of the status of their exercise during the money movement step of the exercise. Error messaging will now provide a single failure message clarifying what caused their exercise to become stuck during the money movement step of the exercise including errors around cancelation requests, bank account removal, and insufficient funds in the bank account.

Who this affects

All users exercising for private companies on Carta.

How it works

Today, users can view the status of their exercises in progress on the Holdings page and with the new Payment Status Update feature, these exercises will now display an ‘Error’ bubble beside the active step when the exercise gets stuck. Clicking the ‘View details’ button will navigate the user to the Exercise tab on the Option grant modal with user instructions to help resolve their stuck exercise. 

On the Exercise tab, error messaging will provide user action to contact their company admin through the Option grant modal’s Report Issue tab, to contact Carta Support through the chat, or update their bank account information on the Payment Information page. 


Mass Issuance Report

What's new?

Upon going public, issuers must communicate the share positions held on their former cap table to their new public Transfer Agent. Carta’s Mass Issuance report captures key information that Transfer Agents in order to validate and reflect public share ownership following an IPO. 

The Mass Issuance report aggregates pertinent cap table and tax-related (e.g, cost basis) information, typically found in multiple reports, into one export file containing information required by the Transfer Agent. Now issuers can easily export ownership information for communication to their Transfer Agent in one step.  

The Mass Issuance report includes additional information on the Issuer's stock program shares to make it easier for the Issuer to move the eligible portion of its stock ledger back to an equity management provider - such as Carta - from the Transfer Agent. This helps preserve critical tax information while facilitating the delivery of public shares to the stakeholder's Carta portfolio for trading.

How does it work?

Experience a secure and smooth data transition as you move your private equity records to a public Transfer Agent. 

The Mass Issuance report:

  • allows for the easy communication of ownership data to a public Transfer Agent in one file ahead of an IPO, SPAC or direct listing; and
  • includes additional fields needed for when you permission your Transfer Agent to send your public stock ledger to a public equity management provider of choice - such as Carta.

Reach out to Carta to get the process started

Are you preparing to go public? Reach out to Carta’s public markets team (carta.public@carta.com) to begin planning your IPO journey.

The Mass Issuance report can be found under your Reports section in Carta.   

Early Lockup Release Feature (Public Markets)

What's new?

Customers wishing to allow their shareholders to sell a portion of their holdings prior to a traditional 180-day lockup expiration can now control early lockup release programs through Carta. With Carta’s early lockup release functionality, your company can specify the quantity of shares each shareholder can sell during a specified period. 

Carta’s Public Market Equity Management Services team will work with companies to determine: 

  1. shareholder eligibility for the early lock-up release period
  2. the start and end date of the liquidity period
  3. how many shares each individual may sell during the period

After gathering this information, Carta will then work with the customer to complete an import template, which will be uploaded to Carta's public platform. Eligible shareholders will now be able to see the quantity of shares they can trade, what they’ve already traded, and what portion of shares is still remaining. 

Allow your employees to begin trading company shares Day 1 post-IPO

The early lockup release feature:

  • allows your employees to sell prior to the standard 180-day lockup period while enforcing the terms of your company’s early lockup release program; and
  • makes it easy to instruct participation eligibility and quantity limits for all shareholders.

Figure 1: Shareholders can monitor the number of shares they can sell during the early lockup release.

Figure 2: Shareholders are limited to the quantity of shares that they are allowed to sell per the rules of the early lockup release. Quantities can be set specific to an individual.

Trade limits apply across asset types. The sale of long stock, in addition to cashless option transactions, will count against the shareholder’s total allowed quantity to trade, ensuring that the stakeholder won’t oversell per the terms of the early lockup release.

Reach out to Carta to get the process started

Reach out to Carta’s Public Markets team (carta.public@carta.com) to begin customizing an early lockup release benefit for your employees ahead of an exit.

83(b) Automated Submission

What’s New

Users that choose to early-exercise will now be able to submit an 83(b) form automatically to the IRS while exercising. Furthermore, users can now update their SSN, digitally sign the 83(b) form, and review personal information during the exercise request. In addition, users now have an improved UI to access the PDF and tracking number of their 83(b) form on the 83(b) Elections tab  on the Option Grant modal.

Who this affects

Any US-based users with early exercisable option grants, and ACH eligible who choose to early-exercise through Carta. 

How it works

83(b) Automated Submission Option During Exercise Request

The 83(b) Automated Submission option will be available during an exercise submission. Users will be able to choose between performing an Automated 83(b) Submission or a Manual 83(b) submission (if the user selects to submit their 83(b) form manually, they still have the option to utilize the automated submission feature through the Option grant modal as long as the current date has not exceeded 25 days from the exercise date).  







Figure 1: On the Review Tax page, users now are given the option to automatically submit an 83(b) form or manually submit the form; If the user chooses to submit the automated 83(b) form, they can add/update their SSN directly






Figure 2: Updated Sign and Submit modal which includes an Automated 83(b) Submission Agreement section signed via digital signature.


Figure 3: Updated Congratulations page stating that the 83(b) form is being sent to the IRS. 



Figure 4: 83(b) elections tab on the Option Grant modal to view the USPS tracking number and the submitted 83(b) form.  


Included Personal Information

To submit an automated 83(b) submission, a Social Security Number (SSN) is required by the IRS to properly verify the identity of the user. If the user’s SSN isn’t filled in the Account settings, users have the ability to add and confirm their SSN when selecting their submission method. Otherwise, when users navigate to the Review Exercise page, the automated submission will pull the user’s Name, SSN, and Address directly from the Account settings.


Digital Signature

On the Sign and Submit modal (Figure 2), users agree to automatically submit the 83(b) form by signing the agreement via digital signature. The digital signature is added directly into the PDF of the 83(b) form.

Status of submission 

The 83(b) form PDF and Tracking number will be provided and displayed in the Option grant modal on the 83(b) Elections tab. The user will be able to track and check the status of their 83(b) Automated Submission.

83(b) Manual Submissions

Manual 83(b) Submissions UI has been improved on the 83(b) Elections tab providing users with an 83(b) form to print and sign which is to be mailed manually by the user. To complete their manual submission, users will be required to upload their signed copy of the form in addition to the date that the 83(b) form was sent to the IRS on Carta. Further, users may choose to submit an automated submission on the 83(b) Elections tab.



FAQ

1. Can I still use the previous workflow for 83(b) Submission?

Yes! If you would prefer to file your 83(b) form manually, you still have the ability to do so! During the exercise workflow, you may select “Submit an 83(b) form later” as your submission method, and you’ll have the option to download and print an 83(b) form from the 83(b) Elections tab on the Option grant modal.


2. What happens if my exercise gets stuck or canceled?

If you select automated submission of your 83(b) election, it will be initiated immediately after you finish submitting your exercise.  If your exercise gets canceled, you should consult with your legal and tax advisors on what to do with your filed 83(b) election form.

3. How will I know that the IRS has received my automated submission? Will I be able to closely follow the progress of the 83(b) submission?

You can navigate to the 83(b) elections tab on the Option grant modal to verify the status of the 83(b) form using the tracking number provided by USPS to follow the progression of your 83(b) submission. Status updates are available as soon as the package is delivered to the USPS.

We highly recommend printing and storing the online USPS confirmation as this information is only available for a limited amount of time. 




Additional Resources

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