When you work in tech and accumulate a mix of equity, it’s easy to start mentally spending money that doesn’t exist yet. IPO headlines, valuation chatter, and comparisons to other companies can make a potential liquidity event feel imminent, even when it’s not.
The first thing I always stress is the difference between thinking about a liquidity event and actually being in one. Most companies never go public. And even when they do, the timing, valuation, and ability to sell are rarely as clean as people expect.
This is a situation where restraint matters.
Don’t Plan Your Life Around a Hypothetical Outcome
Right now, you may be looking at share prices that could be $40, $50, or $60 if an IPO happens. That range alone tells you how uncertain this is. It could also be lower. Or it could take years. Or it might never happen at all.
Spending significant time modeling outcomes that may not materialize is usually not productive. The better approach is to understand the mechanics and risks, then stay focused on what you can control today.
When things become more concrete, that’s when detailed planning becomes valuable.
How RSUs and ISOs Are Actually Taxed
A lot of anxiety around IPOs comes from misunderstandings about taxes.
RSUs are taxed as they vest. You don’t face a large, surprise tax bill just because a company goes public. The income tax has already been paid at vesting. The only additional tax exposure comes from selling shares above your vesting price, which creates capital gains.
Those gains can be short term or long term depending on how long you hold after vesting. Holding for at least a year matters.
ISOs are different. They can create alternative minimum tax exposure depending on strike price, valuation, and timing. Whether that becomes an issue depends on the numbers and the timing, which is another reason not to over-optimize too early.
Understand the Real Liquidity Constraints
Many people assume that once a company goes public, everything becomes liquid overnight. That’s rarely the case.
Lockup periods are common. Selling windows are often staged. And even when shares become tradable, there are limits on how much can realistically be sold at once without affecting price.
This is why planning too far in advance often leads to the wrong decisions. Until the rules are clear, precision planning isn’t possible.
Concentration Risk Is the Bigger Issue
If a liquidity window does open, one of the first real decisions is whether to take some risk off the table.
That’s not a statement about the quality of the company. It’s about portfolio construction. IPOs tend to underperform in the secondary market after the initial excitement fades. The big gains usually happen before public trading begins, not after.
Taking partial liquidity can reduce concentration risk and rebalance your financial life without assuming the company’s best days are behind it.
Start With a Base Plan That Works Without the IPO
The most important planning principle here is simple. Your financial plan should work even if the IPO never happens.
If an IPO does happen, that becomes upside. Not the foundation.
Once outcomes are more certain, we can model scenarios, evaluate tax impacts, and plan a thoughtful exit strategy over time. Until then, understanding the structure, avoiding emotional decisions, and keeping expectations grounded is usually the right move.
This post is adapted from a recent episode of the Scholar Wealth Podcast. For more perspective on equity compensation, IPO planning, and managing concentrated stock risk, listen to the full podcast episode here.