Negotiate terms you can rely on if the IPO is delayed or never happens: documented salary, bonus, equity-award details, and decision rights. A projected listing date or hypothetical IPO price is not a promise of vesting, liquidity, or cash. Your equity plan and individual award agreement—not informal assurances—set the rights attached to your shares or options.
First, find out what “approaching” means
Ask the company to describe its IPO process and the milestones it has reached. Is it considering a listing, formally preparing for one, or has it publicly filed? Ask what is known, what remains uncertain, and whether the compensation being offered depends on a particular event.
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Treat any timing estimate as an estimate, not a commitment. A company can delay or abandon a listing, and an expected date does not by itself change your award’s vesting, exercise, or sale terms. Negotiate a package that still makes sense if no IPO occurs.
Get the governing documents before valuing the offer
Request the current equity incentive plan, your individual award agreement, and any offer letter or amendment that describes compensation. Read them together: the plan and award agreement establish the award’s operative terms, while an offer letter may summarize or promise terms that should be confirmed in the controlling documents. Schwab also advises employees to review the plan and award agreement to understand compensation and the potential effects of liquidity events.
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Do not assume that an email, slide deck, recruiter statement, or verbal promise changes the plan. If the company agrees to a specific term—such as additional shares, a bonus, or acceleration—ask for it in the signed offer or another binding written document, and clarify how it interacts with the plan and award agreement.
Identify exactly what equity you are being offered
“Equity” can mean different awards with different costs, conditions, and tax reporting. Ask for the award type and the complete terms before comparing it with salary or another offer.
If the award is stock options
- Ask for the number of options, strike price, vesting schedule, expiration date, and the deadline to exercise after your employment ends.
- Confirm what happens to vested and unvested options if you resign, are terminated, change roles, or the company is acquired.
- Ask how much cash would be required to exercise, and whether the company has documented any way to cover that cost. Do not assume you can exercise without paying the strike price.
- Find out whether the options are incentive stock options (ISOs) or nonqualified stock options (NSOs). The type affects tax reporting; the IRS’s Topic 427 directs taxpayers to guidance specific to the applicable option type.
If the award is restricted stock units
- Ask when the units vest and when shares are delivered or settled. Those dates may differ.
- Check whether continued service is the only vesting condition or whether an IPO, other liquidity event, or additional condition is required.
- Ask what happens to units that have not vested if your employment ends or the company is acquired.
If it is another award
Ask the company to name the award, explain its vesting and settlement mechanics, and provide the governing documents. Do not infer the treatment from a label such as “shares” or “ownership.”
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Compare cash and equity on separate lines
Start with salary, any guaranteed bonus, and benefits. Then assess equity as a separate, uncertain part of the package. A private-company share count is not cash, and a preferred-share financing price, internal estimate, or hypothetical IPO value does not establish what your common shares or options would be worth—or whether you could sell them.
For each equity offer, record the share or unit count, award type, vesting and forfeiture conditions, strike or settlement cost, and the basis for any stated ownership percentage. If the employer quotes a percentage, ask which share count it uses and whether it assumes future dilution. Ask what share class the award represents and how the company distinguishes that class from preferred shares. If the company will not provide an answer, leave the assumption unresolved rather than filling it in with a guess.
There is no universal calculation in the cited employee guidance that turns private-company equity into a reliable expected IPO payout. A useful comparison is therefore about terms and risks, not a single headline valuation.
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| Offer component | What to compare | What to establish in writing |
|---|---|---|
| Cash and benefits | Salary, guaranteed versus discretionary bonus, and benefits | Amount, payment timing, and conditions for any bonus |
| Equity award | Award type, share or unit count, vesting, and forfeiture conditions | Plan, award agreement, and any special conditions |
| Option cost | Strike price, exercise deadline, and cash needed to exercise | Current option terms and post-termination exercise period |
| Potential ownership | Share-count basis, share class, and dilution assumptions | The assumptions behind any quoted ownership percentage |
| Liquidity and tax timing | When a sale might be possible, restrictions, and tax-sensitive events | Applicable lock-up or transaction terms; personal tax treatment requires individualized advice |
Ask how and when you might be able to sell
An IPO does not necessarily mean employees can sell shares immediately. Ask whether employees are expected to face an underwriter lock-up after a listing, trading windows, or blackout periods, and how those restrictions would apply to your shares. The company’s plan and award agreement may also affect what happens around a liquidity event; review their actual language rather than assuming a public listing triggers a particular result.
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Ask whether the company is considering a tender offer or secondary transaction and, if so, whether employees would be eligible and what written terms would govern participation. Carta describes tender offers and secondary transactions as possible pre-IPO liquidity routes, not guaranteed employee entitlements. Eligibility, timing, limits, and tax effects depend on the transaction.
Check for acceleration instead of assuming it
Ask whether any IPO-related vesting acceleration is contractual, exactly what event triggers it, and whether it applies to all or only part of the award. Do not assume that an IPO itself accelerates vesting. Also check what happens to awards in an acquisition or if your employment ends before the relevant event.
Make a counteroffer around what matters most
Choose the terms that address your actual needs, then make a specific request. If salary is below market or you need dependable income, prioritize a higher salary or a guaranteed sign-on or retention bonus rather than relying on equity that may remain illiquid. If the company has limited cash, you can ask for a defined equity increase or refresh grant—but request the share count, award type, vesting schedule, and other material terms in writing.
For example, you could say: “I’m interested in the role. Because the equity may not be liquid on the timeline we discussed, could we increase the base salary to [amount] or add a guaranteed bonus of [amount]? If cash is fixed, I’d like to discuss an additional [number] [award type] with the vesting and exercise or settlement terms documented in the offer.” This is a negotiation approach, not a guarantee that the employer will agree.
Use the same discipline for a promotion or retention package: specify the amount, payment trigger, award type, vesting, and any conditions. A promise to revisit compensation near a projected IPO is less useful than a written term with a clear amount and trigger.
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Use a focused diligence checklist in the conversation
- What is the exact award type, number of shares or units, vesting schedule, and share-count basis for any stated ownership percentage?
- For options, what are the strike price, expiration date, and post-termination exercise period?
- For RSUs, what triggers vesting and settlement? Is there an IPO or other liquidity condition in addition to continued service?
- What happens to vested and unvested awards if I leave, am terminated, change roles, or the company is acquired?
- Is any acceleration contractual, and what precise event triggers it?
- Are lock-ups, trading windows, or blackout periods expected? Is a tender offer planned, and are its written terms available?
- What share-count assumptions, dilution assumptions, and share-class distinctions underlie the equity information you have provided?
- If the role requires me to accept less cash in exchange for equity, can we discuss a higher salary, a guaranteed bonus, or additional equity with clear terms?
These are questions to support your decision, not a claim that employees universally have a legal right to every requested disclosure. If an answer is unavailable, make your decision using what is documented.
Get tax advice before exercising or selling
Tax treatment depends on the award, transaction, timing, and your personal circumstances. For U.S. taxpayers, IRS Topic 427 points readers to guidance specific to the option type for when and how income is reported. Do not treat an option exercise, share delivery, and later sale as one tax event.
SEC Corporation Finance staff guidance, Question 130.01, states: “The holding period for restricted securities acquired under an employee stock option always begins on the exercise of the option and full payment to the issuer of the exercise price.” That statement addresses the holding period for restricted securities acquired through an employee option; it does not by itself determine an individual’s federal or state tax bill, the outcome for an ISO or NSO, or the treatment of RSUs. Tender-offer tax consequences can also vary with transaction terms.
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