Navigating SpaceX Equity Comp & Potential IPO: Insights from a CPA and Financial Planner
By: Doug Johnson, CPA & Jimmy Bisharat
An IPO is an exciting time! Not only is it an incredible achievement for a company, but for individual employees. It means you now have liquidity, and a chance to sell off stock outside of specific secondary offering windows. However, taking advantage of that liquidity also means increased tax complexity, which we’ll discuss in this article.
In planning around an IPO, we obviously want to mitigate tax consequences to the greatest extent possible, but our biggest focus is in planning around the tax implications that accompany a liquidity event. Whenever a big liquidity event occurs, taxes will need to be paid - it comes with the territory of making a ton of money! As such, it’s critical to work with a CPA who understands equity compensation, along with a financial advisor who understands not just equity compensation, but your overall financial goals. The combination of those two professionals working together hand in hand will allow you to approach an IPO with confidence, poised to maximize the opportunity you’ve been given.
General Tax Considerations
It’s important to note that the tax implications of selling your equity differ based on the type of equity compensation you’ve been awarded. Below, we’ll discuss the different things to keep in mind for RSUs (restricted stock units - the most common form of equity comp), NQSOs (non-qualified stock options), and ISOs (incentive stock options).
Tax Implications of RSU Vests & Sales
RSUs tend to make up the large majority of equity compensation most companies issue. This is especially true leading up to and after an IPO. While we’ll still often see NQSO grants issued post-IPO, most refresh/retention grants will be made up of RSUs, so it is important to understand the tax mechanics of this form of equity compensation.
RSUs will generate a tax impact at two specific points in time: upon vest, then upon subsequent sale.
When RSUs vest, the total value of the RSUs vested will be recognized as W-2 income - your employer will also generally sell a certain percentage of RSUs at that vest date to cover withholdings. This is generally a good thing because you want to be paying down that tax liability throughout the year so you’re not hit with a large surprise tax bill at year-end. However, if you want to keep maximum exposure to your company’s stock, you can also opt not to withhold any taxes from your RSU vest at all. It’s important to note that this will increase your year-end tax burden. If you’re looking to withhold more / less than the default amount, it is a good idea to work with a CPA and financial advisor to understand the tax implications of your decision and map out your overall liquidity.
RSUs can also have a tax impact upon sale. Just like any other stock you hold, your RSUs will have a cost basis, and that cost basis is the price at which your RSUs vest (you should be able to see this cost basis figure in your equity management platform). Whenever you end up selling your RSUs, you’ll face either short- or long-term capital gains based on the difference between your cost basis (the vest price) and the actual sale price. If you sell immediately upon vesting, this spread is typically minimal, so there’s not much additional tax impact here. Where we typically see tax impact is when folks vest RSUs and then sell them months later.
Let’s walk through a quick (somewhat silly and unrealistic) example. Let’s assume you vest 1 RSU at a value of $600 on July 1, 2026. On July 1, this $600 will be reflected as W-2 income (we’ll ignore withholdings and the net investment income tax for now). Then, we’ll explore what happens if you sell under the following scenarios:
● Sale made on July 2, 2026 @ $700/share: Short-term capital gain of $100 ($700 sale price - $600 cost basis) taxed at ordinary income rate of up to 37%*
● Sale made on July 15, 2026 @ $590/share: Short-term capital loss of $10 ($590 sale price - $600 cost basis) - may be subject to wash sale rules*
● Sale made on July 2, 2027 @ $700/share: Long-term capital gain (LTCG) of $100 ($700 sale price - $600 cost basis) - taxed at preferential LTCG rate (usually either 15% or 20% depending on overall income) for a massive potential savings vs ordinary income rate*
As you can see above, RSUs are generally subject to the same tax considerations as other holdings in your portfolio.
*This is meant for illustrative purposes only and you should consult a CPA and financial advisor to learn more about your unique situation.
Tax Implications of NQSO Vests, Exercises & Sales
Among option grants (especially post-IPO), NQSO grants are the most common. Similar to RSUs, NQSOs will generate a tax impact at two specific points in time - upon exercise, then upon subsequent sale. Notably - unlike RSUs - NQSOs yield no tax impact upon vesting.
When you exercise your options (NQSOs, that is), the difference between the FMV of the option and the strike price is recognized as W-2 income. As with RSUs, your employer will also generally withhold funds (often withholding a certain % of exercised shares) to cover taxes. Note again - tax impact occurs upon exercise, not vest.
Similar to RSUs, the second time your NQSOs could generate a tax impact upon sale. The tax implications of the sale are equivalent to the tax implications of selling an RSU, so we won’t re-hash those here - simply refer to the prior section in the article.
Tax Implications of ISO Vests, Exercises & Sales
In pre-IPO years, private companies will often give out ISOs, which are a tax-advantaged form of stock option. As an IPO nears, ISO grants will get rarer and/or phase out entirely, but an IPO event can offer an incredible liquidity opportunity for employees holding existing ISOs.
Like NQSOs, ISOs don’t generate any tax impact upon vesting. Their tax impact upon exercise can vary, which we’ll discuss below. Unlike regular NQSOs, however, ISOs allow for LTCG treatment on the entire spread between strike price and sale price, assuming the sale of the ISO meets two criteria:
Sale occurs 2+ years after the grant date
Sale occurs 1+ years after the exercise
This tax treatment allows for a savings opportunity, in that now, the spread between the exercise price and the strike price - which for an NQSO would be W-2 income taxed at up to 37% (for federal purposes) - is taxed at the LTCG rate upon sale. If you’re sitting in the 37% tax bracket, your LTCG rate will be 20%. This means you’d realize tax savings of 17% of the spread between the exercise and strike price. This can, in certain scenarios, easily translate to tens of thousands of tax savings.
There are two potential pitfalls here, though. First, if you exercise ISOs and then don’t meet the required sale criteria listed above, this is considered a “disqualifying disposition” and requires that you recognize W-2 income equivalent to the spread between the strike and exercise price - completely eliminating any potential tax benefit.
Second, in certain scenarios, exercising ISOs can actually trigger alternative minimum tax (AMT). AMT is a parallel tax system to the regular tax system we are all familiar with, and for AMT purposes, when you exercise an ISO, the spread between the strike price and exercise price is added to your AMT income - but not your regular taxable income. As such, exercising a large number of ISOs (especially if there’s a large spread between the value of the stock and the strike price) can often trigger AMT.
The threshold at which AMT is triggered is very situation-dependent (there’s a lot of income thresholds involved in the calculation) so it’s nearly impossible to give generic guidance. It is strongly recommended to consult with a CPA to ascertain the AMT impact of an ISO exercise. One key item to note regarding AMT is that it doesn’t represent double taxation, as any AMT paid will actually be recovered in future years as a credit. As such, although ISO exercises can lead to increased upfront tax exposure, successfully holding / selling ISOs at a price above the exercise price is by far the best long-term tax outcome overall (since AMT paid will be recovered in future years).
Equity Compensation Tax Planning
Any way you slice it, liquidating your equity after a successful IPO (assuming the stock price doesn’t crater instantly) will lead to an increased tax burden. More money doesn’t necessarily always lead to more problems, but it generally leads to more taxes- especially for W-2 earners. Therefore, for high-income years, it’s more important than ever to plan around your tax liability by ensuring you have the cash flow to pay it down, confirming that you’ve met all estimated tax requirements, and utilizing all the options at your disposal to mitigate your tax burden in a fashion that also aligns with your financial goals.
ISO Exercises and Planning Around AMT
As discussed earlier in this article, ISO exercises can often lead to AMT exposure - particularly when there’s a large spread between the stock price and your strike price. While ISOs do remain the most tax-advantaged form of equity compensation overall, it’s critical that you understand the potential AMT impact in the year of exercise and strategize over a multi-year time horizon accordingly. Through proactive tax planning, you can start to understand the impact ISO exercises will have on your year-end tax liability. This information can then help you plan your cash flow needs and build a balanced equity compensation exercise/sale strategy in partnership with your financial advisor.
We should again note that AMT is not true double taxation - any AMT paid will actually be recovered in future years as a credit. Again, the amount of the recovery will depend on each taxpayer’s specific circumstances, but generally speaking, the main way to accelerate the credit recovery is by selling off previously exercised ISOs. Oddly enough, by selling off ISOs, one can often benefit from a large credit in the year of sale, despite realizing significant gains. Detailed tax planning over a multi-year horizon can help you appropriately plan around both upfront AMT exposure and eventual credit recovery in alignment with your overall personal and financial goals.
Allowing Investments to Mature to LTCG Status / Tax Loss Harvesting
Whenever you sell off stock holdings ( whether it is equity in your employer or equities that are part of your broader portfolio) it is almost always advisable to ensure that you specifically sell off positions that have been held for 12+ months and are thus subject to the preferential long-term capital gains rate.
Excluding the impact of the 3.8% net investment income tax (which will apply to both types of gains equally) long-term capital gains are taxed at either 15% or 20% depending on your taxable income. Whereas short-term capital gains are taxed at ordinary income rates, which can reach rates of up to 37%. It is simple advice, but extraordinarily valuable to the extent that you can, allowing your investments to mature to long-term status before selling them off can yield massive tax savings.
In years where you are looking to sell off positions where you’ll realize a gain, you can also “harvest” losses on positions where you’re in the red to offset your gains. Ideally, all of your investments would have yielded a net gain over time, but this isn’t always necessarily the case. To get the most out of your tax loss harvesting for the year, it is typically best to review your tax loss harvesting plan with your financial advisor to ensure that it aligns with your long-term personal and financial goals.
Incorporating Equity Into Your Financial Plan: Cash Flow Planning and the Reality of “Tax Shock”
When equity compensation becomes a meaningful part of your income, cash flow planning matters just as much as tax planning. RSU vesting can create taxable income that is sometimes under-withheld, leading to unexpected tax bills, and option exercises may introduce alternative minimum tax (AMT) exposure in certain years.
Paying AMT itself is not necessarily the issue, as long as it is anticipated and planned for in coordination with a CPA and financial advisor. In many cases, the real challenge is not the tax, but the lack of liquidity to pay it. Without advance planning, individuals may feel forced to sell shares at unfavorable times, tap emergency reserves, or even borrow simply to pay taxes. Proactive cash flow planning helps align income, taxes, and liquidity by setting aside funds throughout the year, managing estimated taxes, and coordinating potential liquidity events with known tax liabilities.
Concentration Risk and Portfolio Construction
A successful IPO can quickly lead to a large portion of an employee’s net worth being tied to a single stock. While it is completely natural to want to hold shares in a company you helped build, taking some chips off the table does not mean you no longer believe in the business. Even if the stock continues to perform well, locking in a portion of gains can create flexibility and reduce the stress that comes with having too much exposure to one company.
Selling a percentage of shares can help fund real priorities such as buying a home, paying for your children's education, building long-term financial security, retiring earlier, or creating liquidity for future opportunities, while still maintaining meaningful exposure to the company’s upside.
In many cases, the more important question is not “Will this stock keep going up?” but “What is this money meant to support?” Ultimately, diversification is not about walking away from a winning story. It is about using your equity to support the life you want to build.
Lockup Periods, Liquidity Timing Risk, and IPO Volatility
Lockup periods can create real planning challenges, as equity events like RSU vesting or option exercises may trigger tax obligations before shares can be sold. Many SpaceX employees have a large portion of their net worth tied to a stock that has historically felt stable in the private markets.
Moving into the public markets changes that norm. Small news headlines or public comments from leadership can move the stock quickly, and with the combination of how visible SpaceX is and how closely it’s tied to Elon Musk, those swings can feel amplified.
Planning ahead, and in some cases taking advantage of internal purchase offerings, can help ensure liquidity is available for taxes, high-interest debt, and short-term goals heading into an IPO and potential lockup period. For certain employees, structured approaches like pre-established trading plans may also be explored as part of a broader strategy.
Charitable Giving / Donor-Advised Funds (DAFs)
For SpaceX employees thinking ahead to a potential IPO, a donor-advised fund may be one option to consider if you are charitably inclined and hold highly appreciated company stock. In general, a DAF allows you to contribute shares instead of cash, which can be a more tax-efficient way to give compared to selling first and realizing the capital gains. Assets contributed to a DAF can be invested and diversified within the account, and charitable grants can be made over time rather than all at once. When used thoughtfully and in coordination with your broader plan, a DAF can help align charitable goals with long-term financial planning in a tax strategic manner.
Building a Team
Equity compensation decisions around an IPO are complex, high-stakes, and often irreversible. The best outcomes typically come from tight coordination between tax strategy and financial planning, which is why we work together as a unified team. Doug focuses on detailed tax modeling, helping you understand potential liabilities across different scenarios while avoiding unnecessary tax exposure. Jimmy focuses on how your equity fits into your broader financial picture, including liquidity and cash flow planning, portfolio alignment, and long-term goals. By working closely together, we help clients navigate IPO events with clarity, making informed decisions that balance taxes, risk, and opportunity. The goal is simple - to help you turn this moment into lasting financial strength.
Gerber Kawasaki Wealth & Investment Management is an investment advisor located in California. Gerber Kawasaki Wealth & Investment Management is registered with the Securities and Exchange Commission (SEC). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Gerber Kawasaki only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Gerber Kawasaki Wealth & Investment Management 's current written disclosure brochure filed with the SEC which discusses, among other things, Gerber Kawasaki Wealth & Investment Management's business practices, services and fees, is available through the SEC's website at: http://www.adviserinfo.sec.gov .
Jimmy Bisharat is a Financial Advisor of Santa Monica, California-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately ~$4.09B billion in assets under management as of 12/31/25. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss. Readers shouldn't buy any investment without doing their research to determine if the investments are suitable for their situation. “All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results."
Disclaimer: This article and its content are to be used solely for informational purposes, and nothing herein constitutes tax advice or guidance on the behalf of Doug Johnson CPA. For tax guidance, consult your tax professional.