With SpaceX's stock market listing set for Friday, employees are wrestling with how to manage the sudden windfall they stand to receive, the Wall Street Journal reported.
Staff at SpaceX and other major companies approaching US listings — including Anthropic and OpenAI — are increasingly seeking out wealth managers for advice on when to sell their shares and at what price, the Journal reported Tuesday.
One former SpaceX employee, who holds shares worth roughly $21.4 million based on the expected offering price, recently consulted a wealth manager and was advised to sell a portion of the stake. The employee hesitated to sell early, however, citing expectations for the company's future growth.
Wealth management professionals warn that employees should guard against the risk of having too large a share of their assets concentrated in a single company's stock.
Tara Schulman, a financial adviser at EMC Planning, counsels her clients to draw up a diversification plan in advance and avoid letting emotions drive their decisions. "Employees who receive stock grants need to make sure they are not swept up in the emotional turbulence that inevitably follows a company's IPO," she said. "Rather than trying to sell at the peak, it's more important to set your own criteria."
Diogo Monica, a venture capital investor and co-founder of crypto bank Anchorage Digital, said he follows a set strategy when a company goes public: sell 20 percent of his holdings immediately, offload another 60 percent over time, and hold the remaining 20 percent for the long term.
Experts agree that careful tax planning is essential. Employees at SpaceX, Anthropic and OpenAI receive equity compensation in various forms — including non-qualified stock options, incentive stock options, restricted stock units and employee stock purchase plans — and each carries different tax treatment. A misstep could result in a far larger tax bill than anticipated.
Selling too many shares in a single year, or exercising a large volume of non-qualified stock options at once, can push an employee into a higher tax bracket. Incentive stock options are especially sensitive to timing, with the tax burden varying significantly depending on when they are exercised. Spreading exercises across multiple years is the generally recommended approach.
betterj@heraldcorp.com
