To compensate and retain key executives, organizations frequently offer stock as a component of the executive’s compensation package. There are three types of stock offerings that the company may offer: incentive stock options (ISOs), non-qualified stock options (NSOs), and restricted stock units (RSUs).
In typical IPOs, there is usually a 6 month lock out period where insiders cannot buy or sell securities in the company. This can be a disadvantage since stock prices can fluctuate considerably during these 6 months. When a company does a direct listing to go public, the shares are valued when they start trading and there are no lock out periods. In addition, there are no institutional or accredited investors lined up to purchase the stock as there would be in a regular IPO listing.
So, if you have stock options and your company will be going public using a direct listing it is important to work with a financial planning consultant to make a plan as soon as possible. You do not want to go into the direct listing with no game plan and try to figure it out as you go.
Important Disclosure
This blog is for informational purposes only and not to be misinterpreted as personalized advice or a recommendation for any specific investment product, strategy, or financial decision. This article does not contain sufficient information to support a financial or investment decision. If you have questions about your personal situation, consider speaking with a financial or tax advisor.
