How startup employees can sell their pre-IPO shares in tender offers or secondary transactions and what the tax implications are of doing this.
Oct 20, 2020
It usually comes as a surprise when tech and startup employees learn that they can sell their shares before their startup goes public - this is frequently referred to as liquidity.
That's right: liquidity provides startup employees the ability to find a buyer and sell their pre-IPO shares.
An example of a startup that provides frequent liquidity to their employees is Carta. They run a tender offer or secondary for their employees once per year - more here. They also provide software to help employers facilitate liquidity for their employees.
Employers have a couple of options to help their employees sell their pre-IPO shares.
For #1, talk to your employer. For #2, we will point you in the direction of funds and marketplaces with investors that specialize in buying shares from startup employees that are pre-IPO.
Here are some funds and marketplaces where you can sell your shares (in alphabetical order):
If we missed any vendors, would like to be added to this list, or have questions, please reach out to [email protected]
(Note: We are not affiliated with any of the above vendors, we're just trying to be helpful)
Some employers don't allow their employees to sell their pre-IPO shares for a number of reasons. This is unfortunate, but it is changing. Talk to your employer.
Buying stock options (ISO, NSO, RSU) and selling pre-IPO stock each have unique tax implications, like QSBS, AMT and capital gains. Feel free to reach out to our team of CPAs to get help understanding the tax implications of your decisions and how to optimize. We're here to help: [email protected]