The number of operating companies going public has climbed back every year since 2022, tender offers and secondary sales have widened alongside those exits, and late-stage rounds have swelled, with the median roughly doubling since 2020 to around $100 million. For an employee holding equity, a large round or an IPO filing can feel like the moment paper wealth finally turns into real money.
Not quite, or at least not yet. A round or a filing is welcome news, and it does move you closer. But outside of an actual sale, through a tender offer or a secondary, neither of these events puts cash in your account. What they do instead is start a set of clocks and quietly raise the price of acting on your own equity, which is why they call for planning rather than celebration alone.
A Fundraising Round Is Not a Paycheck
When a late-stage company raises capital, that money goes onto the company’s balance sheet. Unless there is a tender offer or secondary, none of it reaches existing shareholders. Your position is worth more on paper and no more liquid than the week before.
What does change is the price of your own options. A new round generally resets the company’s 409A valuation upward, and that valuation sets the fair market value your future exercises are measured against. For an ISO holder, the gap between the strike price and that rising fair market value is what drives the alternative minimum tax. Picture an employee with 100,000 ISOs at a $2 strike price who exercises once the fair market value reaches $8. That is a $600,000 spread, and it can produce a significant AMT bill even though no shares have been or can be sold. The cash to exercise, and to cover any AMT, comes from your own savings. The question is not whether the company is worth more, but how much more it now costs you to act on what you hold.
The IPO Does Not Make You Liquid, at Least Not Right Away
The filing carries an illusion of its own. An IPO looks like the day the position finally becomes spendable. In practice, most employees cannot sell into the offering at all, and a standard lockup keeps insiders out of the market for roughly 180 days after the listing. The price can move either way while you watch, unable to act. And if your options are near expiration, that is a second clock, independent of the IPO.
Double-trigger restricted stock units can add another layer of complexity and planning urgency. When they settle at the IPO, several years of units can land as ordinary income in a single tax year. 15,000 shares settling at a $30 IPO price is $450,000 of income at once, and employer withholding at the flat supplemental rate can fall well short of a high earner’s real bracket. So you can owe a large tax bill on shares you still cannot sell, and owe more than was set aside for it.
The Most Valuable Moves Have Expiration Dates
Some of the best planning is available only while the company is still private, and it can disappear at the IPO.
Exercising while the shares are still privately valued can be the last inexpensive chance to set a low cost basis and, depending on the facts, start the holding-period clock for long-term capital gains. But the move is not simply to exercise before the IPO. You have to weigh the exercise cost, the tax, the remaining life of the option, the chance the company stays private longer than expected, and the risk that the shares never reach the valuation you are underwriting. Wealth transfer is a second window. Estate planning vehicles such as a grantor retained annuity trust, or outright gifts of shares, do far more work before a valuation spike while the stock is still cheap to move. These doors narrow as the exit approaches.
Tender Offers Create a Different Decision
A tender offer is the exception that puts real cash on the table before an IPO, and the decision is how much to sell now and how much to keep riding toward a public market exit. The right answer depends on how large the position looms over the rest of your balance sheet, not on whether you think the stock goes higher. Participation is often capped at a portion of your vested holdings, so the choice is rarely all or nothing. Treat it as a planning event, not just a chance to take money off the table.
Concentration Is a Risk, Not Just a Number
Underneath all of this, the share of your net worth tied to a single company keeps climbing. By the time a business is nearing a listing, its longer-tenured employees often hold a position that dwarfs everything else they own. It is a double concentration, since your paycheck and your largest asset depend on the same company. And it peaks at the worst moment: just when the position may be at its largest, your freedom to trade it is smallest, hemmed in by lockups, blackout periods, and insider rules. A plan for how much you will sell, and when, has to exist before that window opens rather than get written in reaction to price fluctuations.
What to Actually Do Now
None of these impacts wait for the liquidity event, and neither should the planning steps to manage them. Start by knowing exactly what you hold: ISOs, NSOs, RSUs, any early-exercised shares, the expiration dates, and the direction the 409A is moving. Model the exercise decision against both the tax it may trigger and the cash you will need before you can sell to raise it, and compare grant types rather than grouping all your equity in one bucket. If a tender or secondary is on offer, decide in advance how much, if any, you are willing to sell. Stress test three futures: a strong exit, a disappointing one, and no exit for several more years. And if moving wealth out of your estate will ever be part of the plan, answer that before the IPO.
Conclusion
Model all these decisions with an advisor who has specialized expertise in working with clients through these situations. A large round and an approaching IPO are real milestones, and they deserve to be treated as good news. But for your own finances they are a starting line. A higher valuation can lift what you own while making the exercise, the taxes, the concentration, and the planning all more consequential. The mistake is to wait for the IPO to tell you what your equity is worth and what to do with it, because by then some of the best choices are already behind you. That work belongs in the quiet stretch while the company is still private and your options are still open.
