Expert advice about maximizing your financial gains with the latest ARM IPO news.
After a dry year and a half for tech IPOs, England-based semiconductor and software design company Arm Ltd shook things up with its public debut in September 2023.
Though based in the United Kingdom, the SoftBank-owned company — which has offices in California, Arizona, Massachusetts, and Texas — is opting for a U.S. listing with Nasdaq.
Arm plans to sell its shares on Nasdaq, targeting a valuation up to $70 billion. Should things pan out, Arm will be the first true tech IPO since early 2022. This moment is a hopeful, positive sign that things are starting to open up in the tech IPO market.
IPOs are a big deal for tech employees. For some, public debuts can even be a vehicle to achieving financial freedom. To make the most of this financial opportunity, U.S.-based employees of Arm who own stock options or RSUs should begin planning for the big day.
If you’re a U.S.-based Arm employee, read this blog post to help gear up for your looming IPO and set yourself up for financial success.
4 things to do before Arm’s IPO
Now that you know the IPO is coming, you have some preparing to do to make it a fruitful one.
The first thing you’ll want to do is collect all your options, benefits, and paperwork together. Having all your options and IPO-based money-making opportunities in front of you will give you the full picture of what you’re working with. Then, follow these steps:
1. Aggregate
Your first step in smart IPO planning is to gather all your documents into one place regarding your vesting schedule, the amount of options you’ve vested thus far (or will vest by the IPO date), and everything you have that’s yet to vest in the future.
You’ll also want to gather any Arm shares you currently own, especially if they’re founder’s shares or qualified small business stock (QSBS).
2. Determine your goals
From there, decide what your goals are before you dive deep into the monetary possibilities. This approach ensures your plans are in your best financial interest, and aren’t just about turning over cash as quickly as possible.
3. Figure out your projected tax bill
Then, look at everything that will vest on Arm’s IPO date: Find out how many shares of the tech company you’ll have on the IPO date, and what Arm expects the share price to be on that date. For example, if you have double-trigger RSUs that will vest into your possession on the IPO date, how many shares will you receive? And how much will they be worth?
With that amount, figure out the minimum amount of money you’d need to set aside for taxes to cover that bill. Also figure out if and how many shares you’ll have to sell to cover said tax bill.
4. Consider exercising more options
If you’re going into Arm’s IPO without any options exercised and without much of your RSUs vested, you may want to go ahead and exercise some of your incentive stock options (ISOs) to start the one-year holding period for long-term capital gains.
Whether or not you do this depends on your unique financial situation and your goals, so make sure you talk with your advisor to make a plan you feel good about.
2 things to do before your first trading window opens
Though there’s a lot of anticipation for the day of your IPO, that’s not exactly the biggest countdown for your financial life.
Your IPO day may be fairly uneventful for your finances because of restrictions like employee trading windows. While some of your RSU may release into shares that add to your net worth, and your other options now have a set, tangible market value, there’s not much you can actually do about it.
There are, however, a couple of must-do items between now and the day when your first trading window opens:
1. Figure out your taxes
Once Arm’s IPO happens, the first thing I tell my clients to do is to note down the market price of their company’s shares. Then, use that number to calculate the additional tax they’ll owe, even if they don’t sell anything in their first trading window
Most tech employees will see a significantly larger tax bill in the year an IPO occurs, because their double-trigger RSUs will vest into their possession as shares. (And if they’ve been working for the company for a while, that’s a lot of shares.)
After calculating your taxes, figure out what your additional income will be on top of your salary, what tax bracket that will put you in, and how much more tax you’ll owe after your company’s withholdings.
After running those calculations, make an appointment with your financial advisor to determine the best way to cover that bill, and when to make an estimated payment to cover it.
2. Choose a target selling price
Because you won’t be able to sell your shares right away, you’ll need to use the time right after the IPO happens to decide what price you’d be happy to sell your shares at. The idea is that when Arm’s stock reaches this price, you’ll liquidate and cash out some of your shares.
Choosing a target price is important because a lot of employees get emotionally attached to selling “when it’s higher.” Without a clear number in mind, they actually end up losing out and not reaching their financial goals because they never sell or sell too late.
Work with your financial advisor to figure out your sell price based on market performance, company expectations, and your own personal financial goals.
For more info on this topic, read our post titled You’re an IPO Millionaire Worth $5 Million+ Now What?.
What to do at your first trading window
The real action starts when your first trading window arrives.
On this day, you’ll want to sell whatever amount of stock you need to cover your IPO tax bill, as well as the predetermined amount you set to get your financial goals rolling.
Whether you sell as much as you can upfront, decide to sell a little at a time, or sell by date-based lots as a way to cut down on your taxes; just make sure you take action and sell during this window. If not, you’ll have to wait until the next trading window, and there are no guarantees that the market price will be as high as it is now. (And if that’s the case, you’ll have to go back to the drawing board with your IPO planning.)
If the stock price is high and you want to exercise more than you initially thought, you can even do a same-day sale during your trading window; where you exercise some of your ISOs and turn around and sell them on the same day. Your taxes may be higher, but if the share price is high enough to make up for it, it could be a good financial decision.
Your Arm IPO journey is just getting started
Once you get through everything from Arm’s IPO announcement, down to your first trading window, you’ll have covered a lot of ground but the work doesn’t end there. Learn more about long-term IPO planning in our more exhaustive blog post.
An IPO can be your once-in-a-lifetime opportunity to achieve financial freedom, so make sure you’re setting yourself up to win by working with a financial advisor who’s been there before. The right advisor can cover your blindspots and potentially save you hundreds of thousands of dollars.
Book a call today to talk to myself or another expert on our team about preparing for Arm’s IPO.
