IPO Lockups Put Concentrated Shareholdings and Wealth Plans to the Test

For founders, executives and early investors, an IPO can turn a private-company stake into a visible public-market risk. The shares may be easier to trade once restrictions lift, but the owner’s wealth can remain heavily tied to one company. Advisors face a broader planning problem: how to manage that exposure while accounting for taxes, liquidity needs and other holdings that may move with the same business.

SpaceX puts the timing into focus

SpaceX offers a prominent example of how staggered lockups can extend that challenge. The company floated about 5% of its shares at its June 12 IPO, compared with roughly 20% in a typical IPO. Insider shares are scheduled to become available in stages. Up to 1.3 billion shares become eligible for sale after the company’s third-quarter earnings release, with roughly 800 million more unlocking on Dec. 8. A larger expiration is set for next year. Elon Musk is scheduled to become eligible to sell his shares on June 12, 2027, one year after the IPO.

Those dates describe when selling becomes possible, not how much stock owners will sell or what the share price will be. Still, the waiting period can matter. NISA Investment Advisors analyzed 543 common stock IPOs from January 2019 to December 2025 and found that shares underperformed the S&P 500 by an average of 20.4% between the first-day close and the lockup release date. That historical result gives advisors a reason to discuss the period’s risks with clients, while offering no certainty about the path of any individual stock.

Concentration may extend beyond direct shares

For ultra-high-net-worth families, listed shares can be only one piece of a company exposure built over many years. Some clients also hold stakes through venture capital, private equity and other private-market investments that backed the business before it listed. As those assets become liquid, decisions about selling or retaining shares can affect tax planning, estate plans and the family’s access to cash.

Eric Metz, chief investment officer of SpiderRock Advisors at BlackRock, said the company that built wealth for a founder, executive or early employee can also become that person’s largest portfolio risk. Diversification may be the goal, yet selling outright can be difficult when a client has a very low cost basis, substantial embedded gains, confidence in the company or immediate liquidity needs.

Metz said advisors need to look across the client’s holdings, since public shares may overlap with other investments. That overlap can grow when an IPO company enters a major index. SpaceX’s immediate addition to the Nasdaq-100 after its June listing means some clients holding a large direct position also have exposure through index funds. The size and effect of that combined exposure will vary by client, but a direct stock position alone may not show the full picture.

Managing risk without ignoring tax costs

Metz described the choice as a balance between reducing a concentrated position and managing the tax bill that a sale may create. SpiderRock uses an option-overlay approach intended to alter a portfolio’s risk and return profile without an upfront sale. He said the method may be relevant to clients with highly appreciated shares and tax concerns.

Its Exchange Fund Replication strategy hedges a concentrated position, then replaces that risk with index exposure through listed options. Metz said the goal is to help clients move away from a single-stock risk profile toward broader market exposure in a more flexible and transparent way. The approach addresses exposure through financial instruments; it does not remove the need to weigh costs, portfolio fit and the client’s circumstances.

Kevin Thompson, founder and CEO of 9i Capital Group, pointed to direct indexing as another possible tool. In a separately managed account, a client owns the individual stocks that make up an index. Losses harvested from those holdings may help offset gains from selling concentrated shares. Thompson said some investors use multi-asset direct indexing to reduce single-company risk. The result depends on the holdings and the client’s tax position.

Start planning before a liquidity event

Ben Domingue, founder and managing partner of Family Office Partners, said clients and advisors often begin the work too late. In his view, wealth is built through a sequence of transactions, so planning for the first sale can make later decisions easier. He described a common error as treating the first transaction as though it were the third.

As an example, Domingue cited an owner selling for $500 million who had taken $50 million off the table a few years earlier. He said that earlier transaction could help the owner hold the remaining $450 million without bringing the same stress into family decisions. The figures illustrate his point; they are not a forecast of what any particular business or sale will produce.

A listing can change the character of concentration without eliminating it. Owners give up control but may retain a large stake in a bigger, more established company. Domingue said public-market price changes can create a new source of stress for people accustomed to private valuations, especially when restricted shares remain locked for 12 to 24 months or longer. He also warned that owners may invest money outside the company with the same aggressive instincts they used to run it. In his view, the business itself belongs in the portfolio’s risk assessment.

Look across public and private holdings

Thompson said exposure can accumulate across public and private investments because large companies invest in other businesses while some of those same businesses borrow through private markets. In his view, these connections can create overlapping risks that investors may not see by reviewing each holding separately.

Liquidity also changes how risk appears. Thompson cautioned that liquid investments can show more visible price swings, while less-liquid holdings may look smoother because they are not priced as frequently. A smoother reported return does not necessarily mean the underlying investment carries less risk. A client’s time horizon matters too: a longer horizon may allow more room to absorb short-term volatility, but it does not erase the possibility of loss.

Lockups bar company insiders, including employees, their friends and family, and large shareholders, from selling for a set period after an IPO, according to investor education guidance on IPO lockup agreements. For advisors, that restricted period creates time to map direct shares, private investments, index exposure, tax consequences and cash needs before clients can sell. The task is to coordinate those decisions around the whole family balance sheet, then revisit the plan as lockup dates and liquidity needs approach.