What Should I Do 6 Months Before My IPO Lockup Expires?
Last reviewed: July 2026
Six months before your IPO lockup expires, you should audit every equity grant you own, model at least three stock-price scenarios, set aside cash for the tax bill, and decide in advance how much concentrated stock you will sell on the first available trading day. Pre-IPO planning is the work you do now so you are not making seven-figure decisions on emotion later. The goal is not to predict the stock price. It is to remove panic from the most volatile financial stretch of your life.
Key Takeaways
- Start pre-IPO planning at least six months before lockup expiration, when liquidity is real but you still have time to act.
- Equity compensation is taxed as ordinary income at vesting, and the top federal rate reaches 37% in 2026.
- Lockup expiration often triggers selling pressure that pushes the stock down 10% to 30% in the surrounding weeks.
- A single employer stock above roughly 10% of net worth is a concentration risk worth addressing before, not after, you can sell.
About the Author: Jeff Judge, CFP®, AEP®, ChFC®, CLU® is Managing Partner of Chesapeake Financial Planners in Forest Hill, Maryland. He has been helping families and business owners in Harford County and the Baltimore metro area navigate equity compensation and sudden-wealth events since earning his CFP® certification in 2013, by using Chesapeake Financial Planners’ signature process, the R.U.D.D.E.R. method™. Jeff has watched more than one newly public employee lose a third of their paper net worth not to a falling stock, but to a tax bill they did not see coming.
Why Are the Six Months Before Lockup So Important for Pre-IPO Planning?
The six months before lockup are the only window where you have both real liquidity ahead of you and enough time to plan around it. Most people wait until expiration is weeks away. By then the best moves are already off the table.
Tax strategies need lead time. Donor-advised funds, charitable trusts, and estimated tax payments all require setup measured in months, not days. The IRS expects taxes on a large gain to be paid through quarterly estimated payments, and missing them triggers underpayment penalties. You cannot fix that retroactively.
Diversification needs a plan too. Deciding what percentage to sell, on what schedule, and where to reinvest takes modeling. A 10b5-1 trading plan, which lets insiders sell on a preset schedule, generally must be established while you are not in possession of material nonpublic information, and the SEC requires a cooling-off period before trades begin.
Jeff often tells clients that six months out is the sweet spot. It is close enough that the liquidity is real and far enough out that you can act with a clear head instead of reacting to a stock chart.
Should I Sell My Company Stock When the IPO Lockup Period Expires?
What Actually Happens During an IPO Lockup Period?
An IPO lockup period is a contractual restriction, typically lasting 180 days, that prevents employees and early investors from selling shares after the company goes public. It exists to keep insiders from flooding the market on day one. Understanding the full timeline lets you plan around it instead of being surprised by it.
In the months before IPO, your company files its S-1 with the SEC, management runs the roadshow to institutional investors, and a final price gets set the night before trading opens. On IPO day, the stock can swing wildly, sometimes up 50% to 100%, sometimes down. That first-day move tells you almost nothing about long-term value, and your shares are still locked.
During the lockup itself, your paper net worth can move by hundreds of thousands of dollars in a single day. Quarterly earnings hit. You watch and you wait. Then expiration arrives, thousands of employees can suddenly sell, and supply often overwhelms demand. This is why prices frequently sag in the weeks around lockup release. None of this is a reason to panic. It is a reason to have decided your moves in advance.
How Much of My Portfolio Should Be in One Stock?
How Should RSU Tax Planning Work Before Your Lockup Expires?
RSU tax planning starts with one fact most people miss: restricted stock units are taxed as ordinary income the moment they vest, based on the share price that day, not when you sell. That income gets stacked on top of your salary, and a large vesting event can push you into the top bracket. The top federal rate is 37% in 2026, and high earners also face the 3.8% net investment income tax on gains after you sell.
Here is the trap. Your employer typically withholds taxes on vesting RSUs at a flat supplemental rate of 22% for the first $1 million in supplemental wages, then 37% above that. If your actual marginal rate is higher than the withheld amount, you owe the difference at tax time. On a large vest, that gap can run into six figures.
This is the mistake Jeff sees most often with newly public employees. They see shares hit their account, assume taxes are handled, and spend the cash. Then April arrives and the bill is enormous. The fix is simple but it must happen in advance: estimate your full-year tax liability, set aside the cash, and make quarterly estimated payments so you are not caught short.
How does equity compensation affect my financial plan?
How Much Concentrated Employer Stock Is Too Much?
A useful rule of thumb is that no single stock should make up more than roughly 10% to 15% of your investable net worth. After an IPO, equity-rich employees routinely sit at 50%, 70%, or more in one company. That is concentration risk, and it cuts both ways: it built your wealth, and it can erase a large share of it just as fast.
The hard part is emotional. The stock made you wealthy, so selling feels disloyal or premature. Jeff frames it differently for clients. Selling a concentrated position is not a bet against your company. It is a decision to stop letting one stock decide your family's financial future. A diversified portfolio handles a bad year in any single name; a concentrated one does not.
A staged selling plan, often through a 10b5-1 arrangement set up before lockup, lets you reduce the position on a disciplined schedule rather than guessing the top. You decide the rules in advance, when you are calm, and then you follow them.
How should my investment mix change as I get closer to retirement?
How Chesapeake Financial Planners Approaches Pre-IPO Planning
We run equity compensation strategy through the R.U.D.D.E.R. Method™, Chesapeake Financial Planners' six-step planning process: Review and Recognize, Uncover and Understand, Design and Develop, Discuss and Decide, Execute and Empower, and Reassess and Refine. For a pre-IPO client, that means first cataloging every grant, then modeling the tax and net-worth outcomes, then building a sell-and-reinvest plan you can actually live with before lockup ever expires.
How do financial advisors choose investments for my portfolio?
Frequently Asked Questions
When should I start pre-IPO planning?
Start pre-IPO planning at least six months before your lockup expires. That window gives you enough time to audit your equity, model tax scenarios, set up estimated payments, and establish a 10b5-1 trading plan with its required cooling-off period, while the upcoming liquidity is still close enough to be real and actionable.
How are RSUs taxed when my company goes public?
RSUs are taxed as ordinary income when they vest, valued at the share price that day, and added on top of your salary. After you eventually sell, any further gain is taxed as a capital gain. High earners may also owe the 3.8% net investment income tax on those investment gains.
Why does a stock often drop when the lockup expires?
A stock often drops around lockup expiration because thousands of employees and early investors can suddenly sell at once, flooding the market with supply. When supply outruns demand, the price falls, frequently 10% to 30% in the surrounding weeks. This is common and is not by itself a signal about the company's long-term value.
How much of my employer's stock should I keep after the lockup?
As a general guideline, no single stock should exceed roughly 10% to 15% of your investable net worth. After an IPO, many employees sit far above that. Reducing the position through a staged, preset selling plan lowers your concentration risk without forcing you to guess the perfect day to sell.
What is a 10b5-1 plan and do I need one?
A 10b5-1 plan is a written, preset trading schedule that lets company insiders sell shares automatically, even during periods when they might otherwise be restricted. It must be set up while you do not hold material nonpublic information and includes an SEC-required cooling-off period. It is a disciplined way to diversify a large equity position over time.
Will I owe taxes even if I do not sell my shares?
Yes, you will likely owe taxes on RSUs at vesting even if you never sell, because vesting itself is a taxable income event. Your employer withholds some tax automatically, but the withholding often falls short of your true marginal rate, leaving a balance due when you file. Plan and set cash aside for that gap.
Putting Your Plan in Place
The employees who come through an IPO with their wealth intact are rarely the ones who timed the stock. They are the ones who decided their tax, diversification, and selling moves six months early and stuck to the plan. If this is your situation, our guide to equity compensation and sudden-wealth events walks through pre-IPO planning step by step. Download it at chesapeakefp.com.
Disclosures
The information provided is for educational purposes only and should not be construed as investment advice. Investment strategies should be tailored to individual circumstances, risk tolerance, and goals. Past performance doesn't guarantee future results. Consult with qualified financial professionals regarding your specific situation.
Advisors associated with Chesapeake Financial Planners may be either (1) LPL Financial Registered Representatives offering securities through LPL Financial, Member FINRA and SIPC, and investment advisor representatives offering investment advice through Great Valley Advisor Group; or (2) solely investment advisor representatives offering investment advice through Great Valley Advisor Group and not affiliated with LPL Financial. Great Valley Advisor Group, and Chesapeake Financial Planners are separate entities from LPL Financial.
