Becoming eligible to sell doesn't mean you can sell anytime. After a company goes public, several layers of rules decide when employees can sell. Knowing them ahead of time helps you plan instead of react.
A lockup is a contractual agreement, not an SEC rule, that stops insiders and early shareholders, usually including employees, from selling for a set period after an IPO. Lockups commonly run 90 to 180 days and are sometimes longer or released in stages. They exist to keep a wave of insider selling from destabilizing the stock just after it starts trading. The exact terms for any company appear in its IPO registration statement, the S-1, which is the number to rely on.
Because the stock can rise or fall during a lockup, it's worth planning for both outcomes rather than counting on a particular price when it ends.
When the lockup ends, most public companies still limit when employees can trade company stock. Trading is usually allowed during a window that opens shortly after each quarterly earnings release and lasts a few weeks. The time in between is a blackout period. The purpose is to keep people from trading while they might know results before the public does. Your company's insider trading policy sets the details.
A Rule 10b5-1 plan is a written plan to sell or buy company stock on a preset schedule or formula. You adopt it at a time when you don't have material non-public information, and trades then happen automatically under its terms, including during blackout periods. Set up properly, it gives you an affirmative defense against insider trading claims for those trades.
SEC rules updated in 2023 require a cooling-off period between adopting a plan and its first trade: at least 30 days for most employees, and generally at least 90 days for directors and officers. Plans are usually set up through your company's designated broker and approved under its policy.
Beyond compliance, a 10b5-1 plan lets you commit to selling set amounts on a schedule. That removes the pressure of timing each sale, which many people find is the hardest part. See concentration risk and selling in stages.
| What it means | Why it matters | |
|---|---|---|
| Lockup | No selling for a set period after the IPO, often 90 to 180 days | The price can move before you're able to sell |
| Trading windows | After the lockup, sales are allowed only during open windows | Limits your timing. A 10b5-1 plan can schedule sales in advance |
| Double-trigger RSUs | RSUs that met their time requirement may vest at or soon after the liquidity event | Can create a large ordinary income tax bill all at once |
| Withholding gaps | Federal tax is often withheld at 22%, or 37% above $1 million | If your bracket is higher, you may owe more at tax time |
| Concentration | Much of your net worth may be tied to one stock | A diversification plan can manage that risk over time |