Post-IPO Lockups Expiring This Fall: A Concentrated-Position Playbook

A lockup expiration is one of the few dates in personal finance that is known months in advance and still routinely handled at the last minute. Six months after an offering, shares that could not be sold become shares that can — and for employees and founders whose newly public stock is now most of their wealth, that date arrives with a stack of decisions already sequenced by rules nobody explained. The work worth doing happens in the months before, because most of what is available on day one had to be arranged before it.

What happens when a lockup expires?

A lockup is a contractual agreement between insiders and the underwriters of the offering, typically running 180 days from the IPO. It is not a securities-law restriction, which has two practical consequences: the terms vary from deal to deal, and the underwriters can waive or modify them. Waivers do happen, sometimes for a subset of holders and sometimes to accommodate a follow-on offering.

The terms themselves are frequently more complicated than "180 days." Many recent agreements provide for staggered releases — a portion at an earnings date, the remainder later — or price-triggered early releases, where shares unlock if the stock trades above some percentage of the IPO price for a specified number of days within a window. The first thing to establish is not what lockups usually do, but what your specific agreement says. The prospectus and the lockup agreement are the source; a recollection of the onboarding deck is not.

What restrictions survive the expiration?

Expiration lifts one constraint and leaves several standing. This is the most common misunderstanding among first-time public-company employees, and it produces the most avoidable problems.

The last row ends more plans than any other. A company hedging policy that prohibits derivatives on company stock is not something a strategy can be built around, and it is a question to ask before evaluating collars or overlays rather than after. For affiliates, the Rule 144 volume limitation — broadly, the greater of 1% of the shares outstanding or the average weekly reported trading volume over the preceding four weeks, in any three-month period — often does more to shape the exit schedule than any market view.

What are the options at expiration?

The right choice usually is not one of these but a sequence: a tranche sold to cover known obligations, a plan adopted for a steady reduction, and a structure applied to what remains. Sequencing matters because the paths interact — an option position can affect the character of gain on shares sold later, and a constructive sale would accelerate everything at once.

What about the tax clock?

For most employees the largest tax event has already happened. RSUs are generally taxed as ordinary compensation income when they vest and settle, with the fair market value at that moment becoming the cost basis — which means a newly public employee often holds shares with a basis close to the current price and a much smaller unrealized gain than they assume. What remains is the capital-gains clock, which runs from the vest date, not from the IPO or the lockup expiration.

Two other clocks matter for specific holders. Exercised incentive stock options carry their own holding-period requirements and alternative minimum tax consequences that are easy to trip in the year of an IPO. And founders holding potentially qualified small business stock under §1202 have a five-year requirement that a sale or certain hedges can forfeit — an exclusion large enough that it should be confirmed before any structure is placed on those shares.

When should the planning start?

1. 1Ninety or more days before expiration: read the actual lockup agreement and the company trading and hedging policies. Establish what is permitted before evaluating what is desirable.
2. 2Sixty days before: reconstruct the position lot by lot — vest dates, basis, exercise dates, and which tranches are affiliate shares.
3. 3Sixty to thirty days before: model the tax consequence of the candidate sequences across tax years, including the state component, and confirm whether §1092 or §1259 constrains the structures you are considering.
4. 4Thirty days before: if a 10b5-1 plan is part of the answer, adopt it — the cooling-off period runs from adoption, and adoption requires that you not be aware of material nonpublic information at the time.
5. 5At expiration: execute the first tranche as planned rather than as reacted to.
6. 6After: revisit quarterly. The plan was built on facts — price, position size, tax year, personal need — and all four move.

Notice how much of that list has to happen before the date, and how little of it is a market call. That is the point. By expiration day the useful decisions have already been made, and what remains is execution.

What goes wrong most often?

• Assuming the lockup is the only restriction, and discovering the blackout window or the hedging policy in the same week as the expiration.
• Building a plan around a prediction of what the stock does at expiration. The float expands; the price effect is debated in the academic literature and is not something to underwrite.
• Confusing the vest date with the IPO date when counting the long-term holding period.
• Adopting a 10b5-1 plan too late for the cooling-off period to run before the intended first trade.
• Structuring a collar tight enough to raise §1259 constructive-sale questions, and accelerating the entire gain.
• Selling nothing at all, on the theory that any sale is premature — which is a decision to remain fully concentrated, made by default.
• For affiliates, planning a sale schedule that exceeds the Rule 144 volume limitation and having to restructure it mid-quarter.

The last two are the bookends of the same error: treating the expiration as a market-timing question rather than a risk-and-rules question. The stock may do anything. What you control is how much of your net worth is exposed to it, and whether the plan for reducing that exposure was built while there was still time to choose among the options.

This article is educational and is not investment, tax, or legal advice. Lockup terms, company policies, and eligibility for the structures described vary; confirm each against your own agreements with qualified counsel and a tax professional. Nothing here is a prediction about the price of any security.

This article is for educational and informational purposes only and is not investment, tax, or legal advice. Option strategies involve risk and are not suitable for all investors. Tax treatment of options is complex and depends on individual circumstances, holding periods, and applicable law; tax rates referenced reflect 2024–2025 federal and state estimates and are subject to change. Consult a qualified tax professional and investment advisor before acting. Yayati Asset Management, LLC is a Registered Investment Adviser. © Yayati Asset Management, LLC. VOLT™ is a trademark of Yayati Asset Management, LLC.