So, your company just announced it’s going public.
First off, congratulations! This road to prepare for an IPO is a life-changing financial event. Your stock options, RSUs, or shares—things that may have just been numbers on paper before—are about to become real money.
But now comes the big question: What do you actually do with your stock?
If you’ve never been through an IPO before, you might feel overwhelmed. Should you sell immediately? Hold onto your shares? What about taxes—how much should you set aside?
If you’re feeling a little lost, you’re not alone. A lot of people in your position aren’t sure what to do next. The good news? With a little planning, you can maximize your IPO windfall and avoid costly mistakes.
Here’s how to get organized, figure out your goals, plan for taxes, and set yourself up for financial success.
Step 1: Get Organized – What Do You Actually Own?
Before you start making any big decisions, you need to know exactly what kind of stock you have and how it all works.
Here’s what you need to figure out:
- What type of stock do you have? Are they Incentive Stock Options (ISOs), Nonqualified Stock Options (NQSOs), or Restricted Stock Units (RSUs)?
- How many shares do you own (meaning you’ve already exercised)?
- How many vested options have you not exercised yet?
- What’s your vesting schedule for RSUs?
- Does the IPO trigger a big RSU vest? (Some companies do this.)
- What’s the most recent 409(a) valuation (a.k.a. the latest pre-IPO stock value)?
- What’s the expected IPO price and date?
- Are you locked up from selling your shares after the IPO? If so, for how long?
This might feel like a lot, but knowing these answers will help you make smarter choices with your stock. If you’re not sure where to find this info, start by checking your equity paperwork or asking your HR team.
Step 2: Figure Out Your Goals – What Do You Actually Want?
An IPO isn’t just about money—it’s about what you want to do with that money. The right strategy depends on your personal goals.
Think about this:
- Are you planning to cash out quickly or hold onto some shares for potential long-term growth?
- Will selling help you reach a big financial goal, like buying a house or paying off debt?
- Do you want to diversify your investments so all your money isn’t tied up in your company’s stock?
- What’s your plan for after the IPO—are you staying at the company long-term, or do you see yourself moving on?
These decisions will impact when and how much stock you sell. If you don’t think about this now, you might end up making rushed decisions once your stock becomes liquid.
Step 3: Plan for Taxes – How Much Will the IRS Take?
Taxes are one of the biggest surprises for employees going through an IPO. If you don’t plan ahead, you could end up with a huge tax bill—or worse, a tax bill you didn’t set aside money for.
Here’s how different types of stock are taxed:
- Incentive Stock Options (ISOs): No tax when they vest, and no ordinary income tax when you exercise. However, you may owe Alternative Minimum Tax (AMT) at exercise if the share price has increased. To get the lower long-term capital gains tax rate, you need to hold the shares for at least one year after exercising and two years from the grant date.
- Nonqualified Stock Options (NQSOs): No tax at vesting, but you owe ordinary income tax when you exercise (on the difference between your strike price and the fair market value).
- Restricted Stock Units (RSUs): You owe ordinary income tax the moment they vest. If your company’s IPO triggers a big RSU vest, you could end up with a huge tax bill.
Capital gains tax also plays a huge role here. If you hold onto shares for at least a year before selling, you might qualify for lower long-term capital gains tax rates (15-23.8%) instead of being taxed at your ordinary income rate (which can be as high as 37%).
But be careful—waiting for lower taxes isn’t always the best move. If your stock price crashes, saving on taxes won’t matter if you lose more money in the process.
This is why having a clear tax plan is so important. You want to make sure you:
- Know how much to set aside for taxes (so you don’t get hit with a surprise bill).
- Decide if it makes sense to wait for lower capital gains tax rates or sell right away.
A specialized equity & tech financial advisor can help you run the numbers and make a plan that works best for your situation.
Step 4: Should You Exercise Your Stock Options Before the IPO?
If you have vested ISOs or NQSOs that you haven’t exercised yet, you might be wondering: Should I buy them now before the IPO?
Exercising pre-IPO can be a smart move, but it comes with risks.
Why You Might Want to Exercise Before the IPO:
- You lock in a lower purchase price, which could mean bigger profits if the stock rises post-IPO.
- If you exercise early enough, you can qualify for long-term capital gains tax rates.
- You get to start the holding period before the IPO, so you can sell sooner.
Why You Might Want to Wait:
- Exercising costs money upfront.
- You may owe taxes immediately (like AMT for ISOs or income tax for NQSOs).
- There’s no guarantee the stock will go up—if it drops, you could lose money.
A hybrid strategy—exercising some now and waiting on the rest—can be a good middle ground. If you’re unsure, talk to a financial advisor before making a move.
Step 5: How Much Will You Actually Make?
Now, let’s talk numbers.
At this point, you should have a rough idea of:
- How many shares you have
- The IPO price (or expected price)
- Your tax situation
Now, run some scenarios. What happens if the stock price goes up? Or down?
For example:
Let’s say you own 10,000 shares, and the IPO price is $50 per share.
- If you sell all of them immediately, that’s $500,000 before taxes.
- But after taxes (assuming 37% for federal + state), you might only take home $315,000.
What if the stock drops to $30 per share after the lock-up period? Now, your $500,000 turns into $300,000 before taxes.
This is why it’s smart to set a few different price targets and plan when to sell. That way, you’re not making emotional decisions based on short-term market swings.
Avoid the Million Dollar Mistake with Your IPO Stock
An IPO can be an exciting opportunity, but it can also lead to avoidable financial missteps—ones that can cost you hundreds of thousands or even millions if you’re not careful. We’ve seen it happen before, and the difference between building wealth and losing out often comes down to having a solid plan before your shares become liquid.
Here are a few ways employees make Million Dollar Mistakes when navigating an IPO:
Holding Too Long and Watching Value Disappear
Some employees believe their stock will keep rising indefinitely, so they hold onto all their shares instead of selling any after the lock-up period. Then, the stock price drops—and keeps dropping. Suddenly, their $1 million paper wealth turns into $500,000… then $300,000, and they realize too late that they should have sold some shares earlier.
Selling Everything Too Soon and Missing Out on Gains
Others do the opposite: they sell everything the moment they can. While this guarantees liquidity, it also means they miss out on potential future gains. Some employees have sold their stock at IPO for $100 per share, only to watch it climb to $200 or more in the months that followed. They locked in cash but lost out on millions in additional value because they didn’t have a structured selling strategy.
Forgetting About Taxes and Getting Hit With a Huge Bill
Then there’s the tax trap. Many employees fail to set aside enough money for taxes, assuming their employer’s withholding is enough. But in reality, RSU vesting and option exercises can trigger huge tax liabilities—often hundreds of thousands of dollars. If you don’t plan ahead, you could end up scrambling to sell shares just to cover your IRS bill, which could mean selling at the wrong time and losing even more money.
The difference between those who make the most of their IPO and those who make a Million Dollar Mistake comes down to strategy, timing, and planning.
Before making any decisions, take a few minutes to explore these scenarios in more depth and learn how to protect your wealth:
Preparing For An IPO Recap: Make a Plan & Get Expert Help
An IPO is an exciting opportunity, but it’s also one of the biggest financial moments of your life—and one that comes with serious decisions. The problem is, most employees don’t think about planning until after their shares become liquid. By then, they’re scrambling to figure out when to sell, how much to set aside for taxes, and what to do with the money. That’s why it’s crucial to get a plan in place now, before you’re forced to make rushed decisions.
The first step is getting organized. Know exactly what stock options, RSUs, or shares you have, how they work, and what your lock-up period looks like. This gives you a clear picture of your financial situation so you’re not going in blind.
Then, take some time to set financial goals. What do you actually want out of this IPO? Are you looking to cash out and buy a house? Do you want to hold onto shares for potential long-term growth? Are you hoping to use this opportunity to diversify your investments? Having clear answers to these questions will help you decide when and how much stock to sell, so you’re not just making decisions based on short-term stock price movements.
Once you have a sense of your goals, tax planning becomes critical. Many employees underestimate how much they’ll owe the IRS, and a surprise tax bill can wipe out a significant chunk of your IPO gains. The type of stock you own—ISOs, NQSOs, or RSUs—affects your tax burden, and the choices you make before and after the IPO can either save you thousands in taxes or leave you with an unnecessary tax hit. Working with an advisor to run projections ahead of time ensures you have a clear tax strategy and won’t be caught off guard.
From there, you’ll need to decide whether to exercise stock options before the IPO. Exercising early can potentially save you on taxes and increase your profits, but it also comes with risks, including upfront costs and potential AMT liability. If exercising is the right move for you, planning the timing and amount will help you make the most of the opportunity while minimizing unnecessary risks.
Finally, you need to run the numbers and create a selling strategy. How much money will you actually take home after taxes? What happens if the stock price drops after the lock-up period? What’s your plan if it surges? The smartest approach isn’t to sell everything at once or hold onto everything indefinitely—it’s to plan for different price scenarios and sell in a way that balances risk, reward, and tax efficiency.
The reality is, your company will have an entire team of advisors guiding them through the IPO process. You deserve the same level of guidance for your own financial future.
If you’re serious about making the most of this opportunity, having an expert in your corner can mean the difference between maximizing your after-tax gains and leaving money on the table.
If you’re feeling overwhelmed or just want a second opinion on your IPO strategy, we’re here to help.
We’ve helped hundreds of tech employees successfully navigate IPOs, and we know exactly what it takes to protect and maximize your wealth.
For your next step, schedule a call with us today. We’ll walk through your stock options, tax strategy, and financial goals so you can move forward with confidence.
This is a once-in-a-lifetime opportunity—let’s make sure you get it right.
Until next time!
