Uber, Lyft and Pinterest are all expected to go public this year, with Lyft first out of the gates at the end of this month. There’s lot of anticipation and excitement for these IPOs, including:
Public investors, who are anxious to participate in the continued growth of these companies;
Venture capitalists, who are looking for public market validation of the enormous private valuations they’ve assigned to these and other unicorns;
Bay Area residents, who expect a flow of newly-liquid riches into local businesses and real estate; and of course
Employees at these firms, who will have a greater ability to realize the wealth in their options and RSUs
Given the tech-centric nature of our client base, we’ve had many conversations with employees at these and other unicorns about how to prepare for an exit and what to do once they’re able to sell their shares.
We don’t believe in a “one size fits all” approach to how we advise clients, but there are some questions that we help answer on a regular basis:
How much of my company stock should I sell or hold?
There are multiple facets to this question, and the particulars of both the client’s situation and goals, and the company’s stock, influence how we answer this. The biggest driver of the answer is determining the portfolio risk/reward profile that’s needed to help the client have a successful long-term plan.
Is there anything we can do to limit the tax bill?
Taxes are a factor in almost every financial decision. We advise clients on strategies ranging from early exercise (83b), utilizing Investment Credit Lines (ICLs) to delay cap gains realization when purchasing property, exploring qualified opportunity zone (QOZ) investments to delay/avoid cap gains, and whenever possible, certifying Qualified Small Business Stock (QSBS) treatment to eliminate capital gains completely.
Is buying a house a good idea?
Real estate purchases are one of the most consequential financial decisions you can make, especially in high cost areas like the Bay Area. We help clients determine how a home purchase fits into their plan, including what they can afford and how their preferred career path (larger company vs younger start-up) can influence their financing decision.
What am I probably not thinking about that I should be?
We get it – our clients are busy and have a lot on their minds. In addition to helping answer their direct questions, part of our role is addressing issues that may not even be on their radar. Do we need to revisit your estate plan or liability coverage in light of this windfall? Will a 10b5-1 plan help insulate you from insider trading risk now that the company is public?