Private Company Equity Is Not Cash

"Private company equity is not cash; it is a high-risk, illiquid asset that may never become money. When you work at a company that is still privately held, the upside of owning shares of that company can be enormous, the rules are murkier, and the mistakes are more expensive."

"The big decisions happen earlier than most employees realize: exercising, taxes, QSBS, leaving the company, and tender offers all require planning. Doing nothing can be expensive. Understand what you own now, before a deadline or liquidity event forces your hand."

"Being at the right place at the right time is one of the best ways to build wealth. IF you are an employee at a company and get granted equity of some kind and stick around long enough for that company to be sold or become publicly traded, you may be in luck. If you have access to equity where you work, you need to pay attention. Especially if it's a start-up and your company is still private."

"I'm not talking about private equity here. I'm talking about being an employee at a company that is not publicly traded on any stock market (which is most companies). When you work at a company that is still privately held, the upside of owning shares of that company can be enormous, the rules are murkier, and the mistakes are more expensive."

Private company equity is not cash and can remain illiquid for long periods, with outcomes that may never convert into money. Major decisions occur earlier than many employees expect, including when to exercise options, how taxes apply, how QSBS rules work, when to leave a company, and how tender offers affect value. Deadlines and liquidity events can force action, so understanding what is owned before those moments matters. Wealth inequality is widening, and institutional fixes are uncertain, making individual timing and opportunity important. Employees at private companies may face murkier rules and higher-cost mistakes, especially at startups where upside can be large but conversion to money is uncertain.

Read at Substack