Massive SpaceX IPO minted thousands of millionaires -- and left financial advisors with a blueprint for the next mega offer | Mint

Summary

With OpenAI and Anthropic waiting in the wings to go public, pre-IPO wealth planning is suddenly urgent.

It's estimated that the SpaceX IPO created more than 4,000 millionaires That is roughly 20% of the employee base. And SpaceX, which joined the Nasdaq 100 index on Tuesday, is not likely to be the only mega IPO this year. OpenAI and Anthropic have confidentially filed S-1s for their own offerings.

These massive transactions will certainly boost property values in areas like Silicon Valley and south Texas. But they will also boost demand for financial and tax planning advice. Let's see how advisors can help:

Planning ahead. It's best when advisors can provide advice before a company goes public. Planning can be helpful in evaluating tax strategies, estate planning, charitable giving, liquidity analysis, and the timing for option exercises.

"The biggest mistake is assuming the planning starts after the stock begins trading," says Mark Stancato, a certified financial planner for VIP Wealth Advisors. "In reality, the most important decisions are often made beforehand."

Option education. An advisor can help educate the client about various types of equity compensation. This is a specialized area of financial planning and advisors who like the intricacies, might want to consider developing a niche. But it requires keeping up with evolving rules, regulations and tax treatments.

Here's a quick rundown of the basics:

Options: These allow the client to purchase a certain number of a company's shares at a fixed price, which usually involves a vesting schedule. For example, suppose Mary joins a private company and is granted an option to buy 10,000 shares at a price of $100 per share. The shares vest equally (2,500 shares) each year, which is when she can exercise the option or make a purchase.Restricted Stock Units (RSUs): This is where a company promises to transfer shares to the client, based on conditions or vesting. To continue with the example with Mary, she would receive 2,500 shares each year, assuming there is a four-year vesting schedule.Restricted stock: These shares are similar to RSUs. The main difference is that the company will transfer the stock to the client today, but they will not get actual ownership until conditions or vesting terms are met. If the client leaves before certain dates, the company will usually repurchase the unvested shares.

Tax strategy. With RSUs, there is no tax on the grant. But there are ordinary taxes on the fair market value of the shares at the time of vesting. This treatment is the same for restricted stock.

There is a strategy that may reduce the taxes owed. It's called an 83(b) election. This means that the client can recognize the income when they receive the shares, when the valuation is likely to be low. If they then sell the shares more than a year later, they will be eligible for long-term capital gains tax treatment. But the client must make the 83(b) election within 30 days of receiving the restricted stock, illustrating the benefit of planning in advance.

It's important to understand that this strategy can be risky. If the startup fails, then the client will have paid taxes on stock that ultimately became worthless.

Avoiding AMT. With stock options, the taxes depend on the type of the option. One type is nonqualified stock options. The gains are taxed as ordinary income when they are exercised.

Another type is incentive stock options (ISOs), which are available only to employees. There is favorable tax treatment if the shares are held for at least two years from the option grant date and at least one year from the exercise date. If these requirements are satisfied, the gain may qualify for long-term capital gains treatment when the shares are eventually sold.

Again, clients still need to be cautious. "ISOs can trigger the alternative minimum tax on exercise, and that's where clients often get blindsided," said Jeff Judge, who is a managing partner at Chesapeake Financial Planners.

AMT exposure is not necessarily bad. But it does require tax expertise and careful planning. An advisor needs to evaluate the timing of the exercise, the client's income, the size of the spread (the fair market value minus the shares purchased at the exercise price), and the potential liquidity risk. This is especially important with pre-IPO shares because the client may face a tax bill before having an easy way to sell the stock to pay the taxes.

Concentration risk. This is often the case with most clients who receive equity compensation. But high-flying stocks can suddenly go cold.

A cautionary example is Figma, a graphic design software company. In the summer of 2025, the company launched its IPO, with the shares surging 250% to $111.50 on the first day of trading. Unfortunately, the company suffered challenges in dealing with the potential disruption from AI rivals. The result: the stock now trades at $20.

Of course, diversification can protect clients from concentration risk, allowing them to lock in gains, reduce volatility, and avoid having their financial future depend too heavily on a single company's stock. But advisors may find it difficult to convince clients to sell company shares.

"Most employees who watched a company grow have enormous attachment to the stock," says Judge. "The conversation I have with clients is this: Concentration got you here, diversification keeps you here."

He recommends advisors construct a systematic sale plan over multiple years. That, combined with charitable giving strategies, he explains, "reduces both the tax bite and the resistance to selling."

Tom Taulli is the CEO and founder of CorvEquity, which helps startups manage cap tables and option plans. He is also the author of The Personal Finance Guide for Tech Professionals: Building, Protecting, and Transferring Your Wealth and a former broker.