Chime is public! This Chime IPO Guide will help you make the best of your situation.
An IPO is an amazing time to change your financial course. Sadly, most Chime employees will lose out on this opportunity.
It happens because most people have never lived through an IPO as an employee. The Chime IPO Guide will help you through the process.
Chime IPO Guide
Here are some common IPO questions:
- After the IPO, what happens?
- What do I do with my Chime stock?
- What taxes do I have to pay?
What You Can and Can’t Do
Now, there are a few restrictions with the IPO process. They are:
- The Lockup Period
- Blackout Period
- Trading Restrictions
Lockup Period
After the IPO is complete, you cannot sell a single share, for several months.
Chime went public on June 12th, and the expected timing to sell shares as an employee is September 10th, according to a recent company filing.
Blackout Period
You cannot buy or sell shares during certain time periods before quarterly earnings releases. This is standard across all companies.
Restrictions on Trading
Some key employees and executives may not be allowed to freely buy or sell Chime shares at any point in time. Hopefully you can participate in a 10b5-1 plan. This is a plan where you can sell shares in a prearranged structure to help avoid SEC-related issues and provide transparency about sales of your company stock.
Foundation of the Guide
First, find and review your stock grant documents. You will be able to determine the following:
- What type of Chime stock you own
- Incentive Stock Options (ISOs)
- Non Qualified Stock Options (NSOs)
- Restricted Stock
- Stock Appreciation Rights (SARs)
- Restricted Stock Units (RSUs) – single or double trigger
- Confirm how many shares you own of each type
- How many shares of each stock type are vested
- The amount of unexercised ISOs and NSOs
- Specifics of the Restricted Stock and SARs
- 83(b) election on any grants
- For shares held for longer than 5 years, determine if you meet the standards for the Qualified Small Business Stock (QSBS) exclusion
- Tax elections available to you
Different Stock Types
Chime RSUs
RSUs are common in privately held tech companies. Once they vest, you obtain ownership. Vesting comes in two versions – single trigger and double trigger.
A single trigger has one requirement, thus the name. You must work at Chime for a specific time period and the shares will be yours.
Double trigger has two conditions: work tenure and an IPO.
Once the triggers are met, you own the shares. There is no further action required.
Furthermore, RSUs become taxable income at the time of vesting. You will need to pay withholding tax on the RSU shares, just like your paycheck.
Chime NSOs
NSOs are a little different from RSUs because you have “the option” to purchase shares and manage when you are taxed. NSOs are taxable as ordinary income at the time you exercise them.
Chime ISOs
You have the “option” to buy shares in Chime with ISOs. When you hold them long enough – one year from the option exercise date and two years from the grant date – ISOs will have long term capital gains. Nonetheless, if you don’t hold the shares for the required period, they become NSOs and lose their favored tax treatment.
Additionally, you may be subject to the AMT with ISOs. This all depends on your overall tax picture.
Guidance is Crucial After the IPO
The Chime IPO Guide is a brief overview. Your IPO strategy requires planning, a dose of technical expertise, and a bit of art. To take full advantage, it’s best to work with a financial professional.
Looking at stock charts of other IPOs can really give you a lot of anxiety. Chime is its own company and it will be public under very unique market circumstances.
Now you must “see into the future” and make the best decisions in the present with your Chime shares. Easier said than done.
Remember that an IPO is a once-in-a-lifetime opportunity. When you look back, what do you want your Chime IPO story to be?
We can chat about the Chime IPO and how you can make the best decisions.