Tag Archives: IPO lockup

Introducing Wealthfront’s Selling Plan

When LinkedIn went public in 2011, the company had about 1,500 employees. Traditional private wealth managers were ubiquitous on campus in their efforts to sign-up the 50 to 100 early employees and executives who met their firms’ multi-million dollar minimums. Unfortunately, that was of little help to the 1,400 other employees at the company looking for support. At Wealthfront, we believe everyone deserves sophisticated financial advice. Today, we’re launching the service I wish the entire LinkedIn team could have had access to back in 2011. Introducing Selling Plan. This service will help solve a critical problem for many that work at public technology companies: How to best diversify concentrated holdings in your company’s stock. Such holdings are often in concentrated […]

Improving Tax Results for Your Stock Option or Restricted Stock Grant, Part 3

Wrapping It All Up: Tax Strategies In this third and final part to our series on the taxation of stock options and restricted stock units (RSUs), we’ll outline some strategies you can use to achieve better tax consequences. While the list below is definitely not comprehensive, it does cover some impactful strategies. Remember that — based on the various types of taxes described in Part 1 of this series — through good tax planning, you may be able to achieve a 19.6% improvement in your federal taxation rate. This improvement represents the difference between the federal ordinary income tax at 39.6% and the long-term capital gains rate at 20%. Early-Stage ISO Exercise and Hold While this may seem like it […]

Improving Tax Results for Your Stock Option or Restricted Stock Grant, Part 2

Applying the Tax Law to Common Employee Stock Situations In the first part of this three-part series, we discussed the four main taxes relevant to individuals. Now we’ll apply that knowledge to show what taxes would be incurred in five common situations faced by employees who work for venture-capital-backed companies. 1: Angel Investment or Founder Stock For many start-up companies, the first money in comes from angel investors or the founders themselves in exchange for preferred and common stock, respectively. In exchange for cash, investors (perhaps through a limited partnership) and founders receive shares of stock. The capital gains holding clock starts with the purchase of these shares, and it stops upon disposition of the stock. The shareholder realizes a […]

The Post-IPO Dilemma: Hedging Your Stock

If your company recently went public and your stock price has gone up significantly then you’re probably wondering how you can hedge your position. Unfortunately there’s nothing you can do while you’re still in the 180-day lock-up period. Most lockup agreements have extremely detailed restrictions included, designed to prevent almost any form of market participation with a security.  It’s too long to reproduce anything but a sample here, but it typically begins like this: In consideration of the Underwriters’ agreement to purchase and make the Public Offering of the Securities, and for other good and valuable consideration receipt of which is hereby acknowledged, the undersigned hereby agrees that, without the prior written consent of each of [names of managing underwriters], […]

WhatsApp: What an Acquisition Means for Employees

The announcement that Facebook is buying WhatsApp for $19 billion generated a lot of interest. The most popular question we received is what does the acquisition mean for the employees financially. IPOs tend to get all the headlines, but in many cases technology companies are acquired. This post will walk through the economics of an acquisition and how it affects all the parties involved. The Terms of the Deal From what I have read, Facebook will acquire WhatsApp for $4 billion in cash and approximately $12 billion worth of Facebook shares. In addition Facebook will grant $3 billion in RSUs to founders and employees that will vest over the next four years. I do not have any special insight into […]

Company Going IPO? Four Things Every Employee Should Consider

Yesterday’s disclosure that Twitter filed to go public has once again fueled interest in the IPO market. Speculation runs rampant that AirBnB, Arista Networks, Box, Dropbox, Evernote, Gilt, Kabam, Opower and Square (all on our list 100 private companies you should work for) are the next to announce. If you work at one of these companies there are four things you need to start thinking about: 1. Exercising your stock options prior to the IPO 2. Gifting some of your stock to family or charities 3. Developing a plan to sell stock post-IPO lockup release 4. Deciding how you will manage the proceeds from the sale of your stock Exercising your stock options prior to the IPO Most companies offer […]

What To Do When Your Stock Lockup Ends

Effect of Post-IPO Lockup on Tech Stock Price

A flood tide of shares is hitting the market in May and June, as a number of the high-profile tech IPOs from the fall emerge from lockup periods, including Jive Software (JIVE), Zynga (ZNGA) and Angie’s List (ANGI). If you’re one of the employees of the 28 companies whose lockups are expiring in May or June, you’re wondering how to diversify your portfolio and when to sell. Here’s our research on the question of what to do in the days immediately following the lockup expiration, presented visually to help you see the dip that typically follows the end of the lockup.* You’ll also notice that it shows the big difference between top-performing and bottom-performing stocks, as well as the average. […]

The One Day To Avoid Selling Your Company Stock

Our analysis of post-lockup stock price data shows that, on average, one of the worst days to sell is on the day immediately following the lockup expiration. We found that companies that had IPOs saw their stock prices decline, on average, by more than 1% that day, following an average 10% decline over the preceding three months. On average, IPO stocks recover from the trough of that day in the next day or two, and some – as highlighted in this related post – sustain their rebounds over time. Because many employees emerge from an IPO with a significant amount of their wealth tied up in their company’s stock, they are in a position of having to determine how to […]

Real Data-Based Guidance On Selling Stock Post-IPO

Today, we’re releasing an analysis that suggests employees in IPO companies making decisions about how and when to diversify their portfolios should take into account whether the companies missed their first two earnings estimates. Companies that missed one or both of their first two quarterly earning estimates had a 70% chance of continuing to trade down in the three months after their lockups had expired, an analysis of 104 technology IPOs showed. The IPOs were from the years 2005-2011, the only years for which data is available. The conclusion could be an important touchstone for employees trying to figure out how rapidly to sell and diversify their portfolios after an IPO. If there’s only a slim chance that a company’s […]

Strategies For Selling Stock Post-IPO

Strategies for Selling Your Stock Post IPO

One of the most important and difficult decisions you’ll make after your company navigates a successful IPO and lockup period is when and how much of your stock to sell. After numerous Wealthfront clients asked the question, Jared Jacobs, one of the engineers here at Wealthfront, created a simulation to help employees at new public companies visualize different approaches to selling some or all of their stock. As far as we know, it’s the first publicly available simulator of its kind. […]