Selling recently IPO'ed shares --> tips and advice?

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noraz123
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Selling recently IPO'ed shares --> tips and advice?

Post by noraz123 » Tue Oct 08, 2019 3:04 pm

Hi,

My company recently went public after a long journey (> 15 years). As customary, my shares are locked for 6 months. I expect there to be a lot of selling when the lockup expires because 1.) there's many hundreds of of ex-employees along with ~2k current employees and 2.) there's been no liquidity as private market transactions were not allowed.

Because of this, I am wondering if Bogleheads have any tips or advice on how best to navigate. For example:
  • Should I sell the immediately when lockup expires? Wait a few days? Sell over time? I'd like to sell all my shares to diversify.
  • Does it matter which brokerage I use? Currently shares are held by AST, my company's transfer agent. I believe that I can request the shares be transferred to broker of my choice. I don't know if any brokerage is faster w/ transferring or would have better execution. I have active accounts with Vanguard, Fidelity and M1, and still have open legacy accounts with TD Ameritrade and Schwab.
  • Anything else to consider? Perhaps take advantage of asset transfer bonuses? BofA/Merrill Edge?


Thanks!

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ray.james
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Re: Selling recently IPO'ed shares --> tips and advice?

Post by ray.james » Tue Oct 08, 2019 3:41 pm

I do not have knowledge on brokerages and advantages.
For the stock, how much is the fair value to your current net worth?
Over next 6 months you will see the stability of the stock. It is continues stability and keep above book value, you can dump 60% to entire stock(CHWY, PTON, PINS). If it falls below book value/ in high growth phase, then you can play the wait game for 25-60% of stock and dump the rest(LYFT,UBER, BYND, ZM). If it fall too low and way below book value you can keep all and wait (or) just sell everything if money is important, with possibility you will get any(GPRO).
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

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noraz123
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Re: Selling recently IPO'ed shares --> tips and advice?

Post by noraz123 » Tue Oct 08, 2019 4:09 pm

ray.james wrote:
Tue Oct 08, 2019 3:41 pm
I do not have knowledge on brokerages and advantages.
For the stock, how much is the fair value to your current net worth?
Over next 6 months you will see the stability of the stock. It is continues stability and keep above book value, you can dump 60% to entire stock(CHWY, PTON, PINS). If it falls below book value/ in high growth phase, then you can play the wait game for 25-60% of stock and dump the rest(LYFT,UBER, BYND, ZM). If it fall too low and way below book value you can keep all and wait (or) just sell everything if money is important, with possibility you will get any(GPRO).
It's about 40% of my net worth. I would very much like to diversify as soon as possible. I think I'd like to sell regardless of what the stock price does due to concentrated risk.

fabdog
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Re: Selling recently IPO'ed shares --> tips and advice?

Post by fabdog » Tue Oct 08, 2019 4:09 pm

not clear they'd let you transfer the shares until the lock up expires, I imagine their transfer agent is handling the lockup. I am sure that broker could sell the shares for you, although it might cost more in commission.

I have no advice on what strategy to use to sell... if you want to sell to diversify, then selling sooner rather than later is better. If you're worried you'll regret selling, maybe sell 50% as soon as you can, and the rest over a defined period (6 months? a year) in one or more transactions

That way you'll hit both angles... sold a bunch in case it goes down, kept half to ell later in case it goes up :D

Mike

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Re: Selling recently IPO'ed shares --> tips and advice?

Post by HomeStretch » Tue Oct 08, 2019 4:17 pm

While your shares are subject to lock-up, you might not be able to move the shares from AST (you need to find out). But definitely transfer the shares when you can and sell somewhere you have free trades. Transfer agents are not usually a low-cost option when you use their affiliated brokerage to sell.

There will possibly be a lot of selling activity when the lock-up expires. That may not work in your favor. Perhaps sell using a limit order. I don’t buy and sell individual stocks frequently so other posters may have suggestions.

Your company may have regular blackout periods (employees can’t trade in the stock) around quarterly and annual SEC filings dates.

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Raybo
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Re: Selling recently IPO'ed shares --> tips and advice?

Post by Raybo » Tue Oct 08, 2019 4:26 pm

Can you buy puts on the stock that expire in 6 months and then deliver the shares when the puts expire? That way, you can lock in a price today without worrying about what the stock price is in the meantime?

Is this allowed?
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Re: Selling recently IPO'ed shares --> tips and advice?

Post by MotoTrojan » Tue Oct 08, 2019 4:28 pm

Wouldn’t other investors know about the blackout and expected influx of sales, and have that priced in well in advance (maybe even now)?

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Re: Selling recently IPO'ed shares --> tips and advice?

Post by noraz123 » Tue Oct 08, 2019 11:51 pm

Raybo wrote:
Tue Oct 08, 2019 4:26 pm
Can you buy puts on the stock that expire in 6 months and then deliver the shares when the puts expire? That way, you can lock in a price today without worrying about what the stock price is in the meantime?

Is this allowed?
Unfortunately, this is not allowed. Moreover, even if it were, I am not sure options are even available yet because it recently listed.

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noraz123
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Re: Selling recently IPO'ed shares --> tips and advice?

Post by noraz123 » Tue Oct 08, 2019 11:53 pm

MotoTrojan wrote:
Tue Oct 08, 2019 4:28 pm
Wouldn’t other investors know about the blackout and expected influx of sales, and have that priced in well in advance (maybe even now)?
I don't know if it's already priced in, but I am assuming it's definitely priced just prior to lock up expiring.

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Re: Selling recently IPO'ed shares --> tips and advice?

Post by noraz123 » Tue Oct 08, 2019 11:58 pm

HomeStretch wrote:
Tue Oct 08, 2019 4:17 pm

There will possibly be a lot of selling activity when the lock-up expires. That may not work in your favor. Perhaps sell using a limit order. I don’t buy and sell individual stocks frequently so other posters may have suggestions.


I haven't bought stock either since I became a Boglehead. I have come to love the simplicity of mutual funds.

Yes, will use limit orders.
HomeStretch wrote:
Tue Oct 08, 2019 4:17 pm
Your company may have regular blackout periods (employees can’t trade in the stock) around quarterly and annual SEC filings dates.
They do. Unfortunately I only have a few days between when lockup ends and blackout begins.

flsonorcal
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Re: Selling recently IPO'ed shares --> tips and advice?

Post by flsonorcal » Wed Oct 09, 2019 12:12 am

noraz123 wrote:
Tue Oct 08, 2019 3:04 pm
Should I sell the immediately when lockup expires? Wait a few days? Sell over time? I'd like to sell all my shares to diversify.
Wealthfront did an analysis on this that you may find to be an interesting read: https://blog.wealthfront.com/sell-employee-stock/
Their conclusion (from looking at 258 IPOs from 1999-2010) was to sell immediately.

kiwi123
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Re: Selling recently IPO'ed shares --> tips and advice?

Post by kiwi123 » Wed Oct 09, 2019 5:47 am

Went through this a few years ago (after a 10 year stretch from pre-revenue to post-ipo)... it's a mental discipline to figure out how to best approach this. Those that did best understood that nothing counts until you sell your options and have cash in the bank. Take a step back and ask yourself what your Net Worth financial goal is - first step is to sell enough asap to meet that goal and remove risk. Anything you sell after that is a bonus.

Those that didn't do well, didn't sell at "ok" prices because they kept on waiting for higher and higher prices. Or, they exercised and held (to try and get LTCG vs. short term tax gains), and then were underwater and still owed taxes. It often wasnt worth the risk to lower taxes by exercising and holding for a year...

An option that might be available to you is a 10b51 plan - this lets you set up an automatic trading plan that lets you sell during lockouts based on trigger prices.

Lastly, plan on paying 50% taxes on your gains if you're selling 6-figures or more. Save this money! If you're expecting 6-figure gains, talk to your accountant sooner rather than later.

Should I sell the immediately when lockup expires? Wait a few days? Sell over time? I'd like to sell all my shares to diversify.
--- see above... sounds like youre mentally on the right track to sell most/all to diversify

Does it matter which brokerage I use? Currently shares are held by AST, my company's transfer agent. I believe that I can request the shares be transferred to broker of my choice. I don't know if any brokerage is faster w/ transferring or would have better execution. I have active accounts with Vanguard, Fidelity and M1, and still have open legacy accounts with TD Ameritrade and Schwab.
--- Probably easiest to leave your options with the current transfer agent. Any changes runs the small chance of something being messed up. Once you've sold, then it becomes easy to transfer the cash to your other accounts.

Anything else to consider? Perhaps take advantage of asset transfer bonuses? BofA/Merrill Edge?
--- Yep, you can pick up free money. Fidelity and BoA had the same transfer bonuses and i would recommend staying with Fidelity vs. opening a new account at Merrill. If you're in mid/upper management, you may find yourself on a wealth manager's cold call list. As a Boglehead you should be immune to their sales pitch... for the low 1% AUM fee you can access all types of amazing investment strategies that they wont guarantee to beat the market :-)

Congrats - it's a long slog to win the IPO race and have the chance to pick up some cash!

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Re: Selling recently IPO'ed shares --> tips and advice?

Post by z3r0c00l » Wed Oct 09, 2019 6:15 am

I would sell half the very day you can, and then the other 50% 6 months after that (or whatever number of months gets you into the next tax year). I would do this for largely psychological reasons, to allay my fear of selling it all for a bad price as well as the fear of holding too long.

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Re: Selling recently IPO'ed shares --> tips and advice?

Post by Jack FFR1846 » Wed Oct 09, 2019 6:32 am

I would (and have in the past) sell at the first possible second. One company I worked for, I did exactly that. It was not an IPO, but one that had run way up. Others I worked with watched as the price went up to $140 and expected that it would go there again. We all had options at $13 when vesting occurred. There was a blackout period coming 3 days following vestment. I sold at $38. Coworkers, having seen that prior $140 price gambled that it would go back up. It didn't, settling at around $15 for years. I just looked and today's price is $47.

You don't know where the price will go. If you sell as soon as possible and take the money, you know how much money you have.
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Re: Selling recently IPO'ed shares --> tips and advice?

Post by StandingRock » Wed Oct 09, 2019 6:35 am

You should sell it all ASAP. It is probably garbage anyway.

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