By Eric Loftus, CFP®
For years it was a line on an offer letter and a number in a portal. Equity. Shares. Something that might be worth a great deal someday, or might be worth nothing. Then your company files to go public, and the “someday” arrives.
With several large, closely watched companies reportedly preparing to enter the public markets, more employees are about to live through this exact moment. It is exciting, and it is also one of the more consequential financial events a person can experience. As with most liquidity events, the decisions you make in the first stretch are often the hardest to reverse.
First, Understand What You Actually Hold
Equity is not one thing, and the type you hold changes nearly every decision that follows.
Restricted stock units (RSUs) become yours as they vest, and the value at vesting is generally taxed as ordinary income whether or not you sell. Stock options give you the right to buy shares at a set price, and the tax treatment differs depending on whether they are incentive options or nonqualified options. If you hold actual pre-IPO shares, you may have choices about timing that are not available to everyone.
None of this requires you to become a tax expert. It does require you to know which category you are in, because a plan built for options can be wrong for RSUs, and the reverse is just as true.
The Lockup Is a Planning Window, Not a Waiting Room
When a company goes public, employees are usually restricted from selling for a set period after the IPO, commonly around six months. It is tempting to treat that stretch as dead time; it’s closer to the opposite.
The lockup is when you can decide, in advance, how much of your position you want to keep and how much you want to convert into a diversified plan. The share price will still move during this window, sometimes quite a bit, but you are not able to act on it yet, which is exactly what makes it a rare chance to plan without the pressure to react. People who use the lockup to make a clear-headed plan tend to act with intention when it lifts. People who wait until the day they can sell tend to react to whatever the stock happens to be doing that morning.
The Concentration Problem
The subtle risk that catches successful employees off guard: a single stock that performed beautifully on the way up represents a large share of your net worth on the way out. The same company that built your wealth now holds an outsized amount of it. And when a stock has been climbing, it is easy to forget how unpredictable any single company can be.
Reducing a concentrated position is not a vote against your employer, it’s a recognition that the money is now yours to protect, and a future you would rather not gamble on one ticker. How quickly and how far to diversify depends on your goals, your tax situation, and how much of your security is tied to that one holding.
Taxes Arrive Whether or Not You Sell
This is the part that surprises people most. With RSUs, the tax can be due when they vest, even if you have not sold a single share and even if the price later falls. With certain options, exercising can create a tax consequence well before any cash reaches your account. It is entirely possible to owe a significant bill on equity you are still holding.
The planning response is to look ahead rather than reacting at filing time. That means estimating the income your vesting will generate, deciding whether to sell shares to cover the tax, and coordinating the timing with the rest of your year. These are choices that are far easier to manage with a plan in hand than to clean up afterward.
The First 90 Days After Liquidity
Once your shares become sellable, the early decisions set the tone for everything after. How much you diversify, how you handle the tax, where the proceeds go, and how this windfall fits the life you actually want are questions that reward a steady hand and a clear plan.
A liquidity event can fund a home, an education, an earlier retirement, or a level of generosity you could not previously consider. It can also evaporate into a series of quick reactions. The difference is often less about the size of the number than whether there was a plan before the money moved.
At Wealth Dimensions, we help employees plan for a public offering well in advance, ideally years ahead and not only once the lockup lifts, and we coordinate directly with your CPA and your other professionals so the tax and investment pieces move together. It reflects our approach to intentional wealth, helping clients direct a one-time event toward what matters most to them, not just a larger account balance.
If your company is heading toward the public markets, we are glad to help you think it through. To schedule a meeting, call (513) 554-6000 or visit wealthdimensions.com.
Frequently Asked Questions
What should I do with my equity when my company goes public?
Start by identifying exactly what you hold, whether RSUs, options, or pre-IPO shares, because the type drives every decision that follows. Then use the lockup period to decide in advance how much to keep and how much to diversify, rather than reacting once you are able to sell. At Wealth Dimensions, we build a plan with employees prior to and during the lockup so they act with intention when it lifts.
Will I owe taxes on my shares even if I do not sell them?
Often, yes. RSUs are generally taxed as ordinary income when they vest, regardless of whether you sell, and exercising certain options can create a tax consequence before any cash reaches you. Planning ahead for that bill is far easier than discovering it at filing time. Wealth Dimensions helps evaluate opportunities like early exercise provisions and 83(b) elections to minimize tax burdens and coordinates directly with clients’ CPAs to estimate and manage these taxes as part of the overall plan.
How much of my company stock should I hold after an IPO?
There is no single right answer, but holding a large share of your net worth in one stock concentrates risk in a way many people underestimate. The appropriate amount depends on your goals, your tax picture, and how much of your financial stability is tied to that one position. The Wealth Dimensions team helps clients reduce concentrated positions thoughtfully, balancing tax efficiency against the value of diversification.
About Eric
Eric Loftus, CFP®, is a partner and financial advisor at Wealth Dimensions, an independent wealth management firm based in Cincinnati, Ohio, where he sits on the portfolio management team, oversees marketing, and delivers tailored financial planning. He joined the firm in 2009 after earning his bachelor’s degree in business administration from The Ohio State University’s Fisher College of Business and holds the CERTIFIED FINANCIAL PLANNER® designation.
For informational purposes only. Not a recommendation of any particular security or strategy or an offer of tax advice. Investors should consult with their financial professional prior to making a financial decision.