As SpaceX, OpenAI, and other mega-cap private companies edge toward historic IPOs, the financial decisions facing their employees are among the most complex and consequential in modern wealth management.
Concentrated, illiquid equity, compressed timelines, and the psychological pull of peer behavior all combine to create conditions where costly mistakes are easy to make and hard to reverse.
Tara Shulman, principal wealth advisor at Compound Planning, works directly with clients navigating these decisions. She’s told InvestmentNews that preparation must begin well before any liquidity event arrives.
"Being IPO-ready starts with organization and clarity," she says. "Employees need a strong understanding of their current financial position, spending habits, tax exposure, and long-term goals before liquidity arrives. One of the most difficult questions we ask new clients is actually very simple: 'How much do you spend each year?' Once you incorporate irregular expenses like travel, home projects, or lifestyle upgrades, the answer is often far less obvious than people expect."
From that foundation, she encourages clients to think about what liquidity would actually make possible such as early retirement, a home purchase, time away from work, or starting a business.
"Once those goals are clearly defined, we can work backward to determine the after-tax amount needed to support them. That framework becomes the foundation for thoughtful selling decisions," she says.
The psychological dimension matters just as much.
"Selling concentrated stock can be emotionally difficult, especially when coworkers, social media, and headlines amplify fear of missing out,” Shulman says. “In my experience, clients benefit enormously from establishing a plan well before the IPO, ideally with the guidance of an experienced third party who can provide perspective when emotions and crowd mentality become overwhelming."
Shulman's approach to concentration risk is deliberately staged rather than prescriptive.
"We generally do not expect clients to fully liquidate their equity immediately after an IPO. Very few people actually do. Instead, we typically think about diversification in stages," she explains.
The first stage targets financial security and getting clients to a level of liquidity that puts retirement on track and protects against catastrophic downside. The second is more aspirational: identifying what would be needed to accomplish major life goals.
"Once those goals are quantified, we can help clients evaluate the tradeoffs between continuing to hold concentrated stock versus gradually diversifying over time,” Shulman says. “Risk tolerance, taxes, market conditions, and the client's emotional relationship with the company all factor into that decision.”
For clients who choose to hold a meaningful position after an IPO, Shulman takes a holistic balance-sheet view: "A concentrated equity position often becomes one component of a larger investment strategy rather than something that must be entirely eliminated. In those cases, diversification may happen around the position instead of directly through it."
Her broader message to advisors is to resist the pull toward a single answer: "The goal is not to force clients into a single 'correct' answer, but to help them make informed decisions that align with their values, goals, and risk tolerance over time."
The period immediately following an IPO is when many of the most damaging decisions get made.
"The first 100 days after an IPO are often emotionally charged and highly volatile. Many of the biggest mistakes happen when employees make rushed decisions in response to either euphoria or fear," Shulman says.
One technical trap she sees frequently: "A common mistake is immediately cashless exercising options simply to establish long-term capital gains treatment on remaining shares. In volatile post-IPO markets, that can unintentionally lock in a very high cost basis while simultaneously reducing exposure to future upside. Employees often underestimate the economic value of retaining optionality."
Tax planning is another area where clients consistently fall short. "Employees frequently focus only on the stock price and fail to fully evaluate withholding requirements, AMT exposure, estimated taxes, and the broader implications of their equity decisions across multiple tax years. IPO-related income can create surprisingly large liabilities if not proactively modeled," she says.
The behavioral dimension is equally significant. "I often see highly intelligent people make irreversible decisions during moments of panic or excitement. Once a trade is executed, the tax consequences are permanent. Thoughtful planning before the IPO helps create structure and discipline during periods when emotions are running high."
With private companies staying private far longer than in previous decades, tender offers have taken on new significance.
"Today, companies are staying private much longer, so tender offers have increasingly become the first meaningful liquidity event for employees," Shulman says. "Many employees instinctively want to wait for the IPO because they assume it will represent the company's peak valuation. But that assumption can be dangerous. Future stock performance depends not only on company execution, but also on interest rates, market sentiment, macroeconomic conditions, and investor appetite for growth assets."
Historical patterns challenge the instinct to wait. "When we look historically at large private companies, many employees are surprised to see that tender offer valuations often performed similarly to broader public market indices over time, but with substantially more concentration risk and illiquidity along the way."
Tender offers, she argues, must be evaluated against the full picture of a client's financial life. "Questions around taxes, cash needs, diversification, career risk, estate planning, and emotional comfort all matter. For many people, partial liquidity can dramatically improve financial security while still allowing them to participate meaningfully in future upside."
The behavioral dynamics at play around IPOs are among the hardest to counteract precisely because they have nothing to do with analytical ability.
"Anchoring to prior private valuations can distort expectations, particularly when employees mentally frame older prices as 'cheap' or newer prices as 'temporary.' Similarly, herd mentality can create enormous pressure to behave like coworkers, especially in environments where everyone is discussing stock prices constantly," Shulman says. "The challenge is that these dynamics have very little to do with intelligence or market knowledge. They are fundamentally human reactions to uncertainty, status, and social pressure."
Her solution is documentation: "I believe it is so important for clients to memorialize their plan in advance including their risk tolerance, diversification goals, and the circumstances that would justify changing course. Having a framework established ahead of time makes it much easier to remain disciplined when emotions inevitably intensify."
An advisor's role in these moments is less about market prediction than about steadiness: "A trusted advisor can play an important role here, not necessarily by predicting markets, but by helping clients maintain perspective and avoid emotionally driven decisions."
Lockup periods are often experienced as frustrating constraints, but Shulman sees them differently.
"Lockup periods can certainly feel frustrating, but they also create valuable time for preparation," she says. "During the lockup window, advisors and clients can refine financial plans, evaluate tax strategies, model different price scenarios, and establish diversification frameworks before trading becomes possible. This period is often less about taking action and more about preparing thoughtfully for when action becomes available."
The emotional pressure is real and distinctive. "Employees suddenly watch their net worth fluctuate dramatically on a daily basis while having little or no ability to respond. Helping clients prepare psychologically for that uncertainty is just as important as the technical planning."
The most important work, Shulman argues, happens before any liquidity event is on the immediate horizon.
"Advisors should model multiple outcomes across a wide range of stock prices, tax environments, and liquidity timelines. That includes evaluating exercise strategies, AMT exposure, concentrated stock risk, charitable giving opportunities, estate planning considerations, and future cash flow needs," she says.
The ultimate objective isn't precision; it's resilience. "Good planning is not about perfectly predicting what a stock will do. It is about helping clients make thoughtful, repeatable decisions that align with their goals regardless of how markets evolve."
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