By Cheryl Winokur Munk
SpaceX just did it. Anthropic and OpenAI are gearing up to do it. Initial public offerings can make employees rich. And the workers of these tech titans must might be wondering how to handle their newfound wealth.
They should ask a financial advisor.
The stakes are particularly high for employees of Elon Musk's SpaceX, which started trading Friday on the Nasdaq in what was the biggest IPO in history. The company has a valuation of roughly $1.9 trillion.
This year "has the potential to be one of the most consequential IPO years on record, with high-profile names across technology, aerospace, and infrastructure transitioning to public markets," Jake Sheldon, director of wealth strategies at Bernstein Private Wealth Management, and Katie Gardner, director of the firm's Institute for Trust and Estate Planning, wrote in a blog.
Ideally, financial advisors develop relationships with clients several years before those clients' employers conduct IPOs, because many private companies offer liquidity opportunities through tender offers. But many employees don't seek financial advice until around the time their company goes public, and in some cases, after the fact. Many of them don't know how to handle overnight wealth or how to navigate tax, asset protection, estate-planning, and philanthropic considerations, which is why good advice is especially important.
Here's how advisors help employees manage the complexities of an IPO:
Start early. Employees often need help understanding trading restrictions they are likely to encounter after an IPO, says Kate Winget, chief revenue officer of Morgan Stanley at Work. For instance, most companies have lockup periods where employees can't sell shares after an IPO, typically 90 to 180 days. Employees, not knowing this, may make spending plans prematurely, Winget says. There will also be times in the future they can't sell, often around earnings. Executives or insiders also have to deal with Securities and Exchange Commission filing requirements for stock sales designed to prevent illegal insider trading.
Planning should be done earlier so employees can start executing on it as soon as the lockup ends, says Brooks Schaffer, founder and managing partner at Waypoint West in San Francisco.
Understand their goals. Some employees want to use their IPO shares to fund their children's education. Others want to buy a house or save for retirement. "We tell clients, 'Address your goals first. If you want this money for a certain reason, make sure these goals are addressed,'" says Jon Ekoniak, senior wealth advisor in the Menlo Park, Calif., office of Focus Partners Wealth.
He offers the real-life example of a female tech executive who had a longtime goal of buying a second home. The selling restrictions on her company stock were lifted, but her shares were worth less than at the time of the IPO, which concerned her. She felt the company was strong and the stock would eventually rise, but she didn't know whether to take the money off the table at that time to purchase a second home or wait to see whether the stock would rebound.
Ekoniak asked questions to gauge how much the client would regret it if the stock price continued to drop and she had even less money for a down payment, forcing her to sell more stock. They also discussed how she would feel if the stock rose significantly after she sold. She decided to go ahead with the stock sale at a price she felt would lead to fewer regrets. She has since put an offer on the house she wanted, and the stock price continues to fluctuate.
Encourage diversification. Schaffer of Waypoint West generally recommends clients hold only up to 20% of their investible assets in company stock. "The problem is that many of these people are more like 80% by the time an IPO comes around, and they don't want to sell," Schaffer says "It has become part of their identity." To urge clients to diversify, he asks whether they would hold a 50% or more concentration in a company's stock if they didn't work there. Usually they say no, which helps support discussions on diversification.
Aaron Marks, founding partner and chief strategy officer at Amplius Wealth Advisors in Blue Bell, Pa., tells clients: "What if all your eggs are in one basket and they crack?"
Take emotion out of the equation. There can be a lot of emotions in owning company shares. Jordan Kienzle, partner at San Francisco-based Baker Street Advisors who chairs the firm's investment committee, says clients often balk at selling when the stock price is climbing, but it might still be prudent to do so to meet their objectives. That's when advisors have to run the numbers and show clients different potential outcomes. Sometimes plans need to be adjusted based on stock price appreciation, life circumstances, or changing goals and objectives, but adjustments should be based on financials, not emotions, he says.
Determine tax strategies. Advisors also work with clients on various tax-mitigation strategies. Selling is often done over a few years, in a tax-efficient manner. "Not just close your eyes, click the button and sell," Marks says.
One popular technique is levered long-short tax-loss harvesting, a strategy that uses margin and leverage to significantly boost the volume of harvestable tax losses. Another option is to defer gains with exchange funds, private investment partnerships that allow investors to diversify concentrated stock positions without triggering immediate capital-gains taxes. Some clients also want to give a portion of their stock earnings to charity, using options such as a donor-advised fund or a charitable remainder trust, a tax-exempt, irrevocable trust that provides income to the donor for a specific period, after which the remaining assets are donated to charity.
Take a long-term approach. Specialized advice may be necessary because of complicated income-tax, asset-protection, estate-planning, and philanthropic considerations. Each of these strategies has its own set of benefits and complexities, and often requires working with outside professionals such as accountants and lawyers, says Bruce Munster, managing director in the Los Angeles office of Wells Fargo Advisors. Often, there's not just one single solution for a client, he adds. "It's many solutions, and those solutions are incorporated over time."
Write to advisor.editors@barrons.com
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June 13, 2026 01:30 ET (05:30 GMT)
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