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You kept all your company stock. And now it’s worth so much less. What should you do?


Picture it: Bay Area, November 2021. You own a bunch of Block (or Airbnb, DoorDash, UiPath, Squarespace, Palantir) stock. You’ve got plans!

All this company stock money is going to take you places! Where? Maybe you’re not sure about that, but it’s gonna be BIG.

Also, selling would mean taxes. Boo, taxes.

So, you hold on to that company stock.

Fast forward to now. 

Oh…sh*t. 

Your company stock is worth ¼ or ½ of what it was less than a year ago.

(And for those of you who aren’t fanatic about Sophia on the Golden Girls: for your own amusement, cultural edification, and just general improvement as a human being: behold.) 

Your old strategy—if you had one—doesn’t feel right any more. Most likely, you are reluctant to sell any of your company stock now, regardless of what your strategy was.

How do you move forward from here? How do you make progress?

Why You’re Stuck (My Best Guess)

If you’re feeling stuck about your buckets of now-much-less-valuable company stock, it’s probably due to some combination of:

  • You have faith in your company. You know it is worth more than its current price. Surely if you hold, it’ll recoup that value.
  • You “anchored” on that higher price in the past and you feel stupid or bad or otherwise embarrassed for not having sold it earlier. Surely you “should have known!” As long as you don’t sell it, you don’t have to admit to yourself that maybe you made a mistake.
  • You don’t actually need that money right now (maybe you’ve mentally allocated it as part of your long-term financial independence investment portfolio), so you feel as if you don’t need to make a decision about it.  And it’s so hard to actually make the decision that you will happily put off making it.

At least, that’s what we’ve seen with our own clients.

You need a strategy. A strategy that you can create while you have the time and space to think a bit more rationally and a bit less…reflexively. And then implement like a robot, because you know deep down that you’ve already done the work of figuring out what’s best for you.

(I almost wrote “more rationally and a bit less emotionally,” but honestly, removing emotions from money is both impossible and kind of stupid to aim for anyways. After all, the ultimate goal of all of this work isn’t a rational destination, it’s an emotional one: You want to feel happy, fulfilled, etc. And you simply can’t divorce your behaviors from your emotions. 

The best decisions are a combination of rational knowledge and emotional motivation.

(Random book recommendation on this topic = Switch: How to Change Things When Change is Hard. This book hit me hard when I read it 5 years ago and has permanently shaped how I think about how our clients and I can change our own behaviors.) 

“I need a strategy. You’re a genius, truly. I know I need a strategy. But how do I create one?”

Well, then, let’s walk through it.

What Your Strategy Should Look Like (10,000-Foot View)

When you create a strategy for your company stock, the logical framework of that strategy ideally shouldn’t depend on the stock price. 

The framework of your company-stock strategy should be sound whether the stock price is soaring, crashing, or galumphing along. That’s kinda what makes it a “strategy” instead of an “emotions-driven free for all.”

To be sure, the strategy can give you different answers depending on the stock price. For example, we often create strategies with our clients that include rules like this: 

  • If the price hits $180, sell half the shares.
  • If the price is between $160 and $180, sell 100 shares.
  • If the price is below $100, hold all shares. 

(To be super duper clear: this is an example, not advice.)

The number of shares the client sells changes depending on the stock price (the higher the price, the more shares are sold), but the overall logic of the strategy doesn’t change.

Strategies that depend on your company stock being a particular price aren’t strategies; they’re wishful thinking.

Certainty Doesn’t Exist. You Can Know Yourself, Though.

It bears repeating: nobody can know what your company stock will do in the future. So, as much as you might crave certainty about that, you cannot have it. Sorry! 

If reliance on a certain stock price doesn’t shape your strategy, what should? You.

Specifically, the only things you can have any certainty about are:

What are your finances like right now?

Are they already well positioned to meet your goals regardless of your company stock? Are do they rely on your company stock money to achieve the things truly important to you?

What are your values?

Freedom? Security? Adventure? Generosity?

What do you want out of life?

Do you really want to own your own home? Do you want to take a sabbatical? Change careers? Take time off to spend with yourself or family? Retire early? Are you pretty cool with your current life for the indefinite future?

How do you feel about volatility?

What feels worse: the idea of holding on to your company stock and seeing it lose another half its value? Or selling your company stock only to see it then double in value? This is sometimes an impossible question to truthfully answer because we’re very bad at predicting our emotions and behaviors in difficult circumstances. 

So, one “trick” is to harken back to another period when your company stock has lost a lot of value and ask yourself, “How did I feel? How did I behave?” How you actually behaved in the past is often a good predictor of how you will behave in the future.

The Three Basic Strategies

Let’s walk through the three basic strategies you have available to you, and how you can choose among them depending on you and your needs and wants and vision of a fulfilled life.

Continue to hold all.

If your financial situation and life is going to be fine regardless of what happens to this company stock, then you have a lot of flexibility in what you do with your company stock.

What does “fine” mean? Well, it means two things to me:

  • You are going to reach the goals that are really important to you in a timeframe that is acceptable, and 
  • You will be (relatively) safe along the way. You will have a big enough cash cushion to see you through emergencies and you wouldn’t be forced into making sub-optimal decisions just because you need some money.

So, if you are able to save towards your goals (financial independence, shorter term goals like a down payment or a sabbatical or career change) out of your salary and other sources of income that aren’t your existing company stock, you are probably in a better position to take the risk of continuing to hold all your company stock. (Again, not advice.)

It might continue to lose value! I mean, giant companies have literally gone out of existence during our lifetime (to wit: Enron), and the stock has become worthless. If you hold all your company stock and that happens, that’d suck. A lot. And you likely would have great regret. 

But if the rest of your finances are strong enough, it wouldn’t be catastrophic.

Or it might gain in value! That, of course, is what we’re all hoping for, and the reason that everyone wants to hold their company stock nowadays. They just can’t believe that their company stock won’t recover, and by a lot. 

And maybe it will! But I hope the last year has taught us that what we believe about our company stock can be profoundly, deeply, entirely wrong.

If you need the money from your company stock (to pay your bills or to achieve certain goals that aren’t negotiable), then continuing to hold your stock is likely a risk you shouldn’t take.

Sell some.

When we take clients through IPOs, they often have a bunch of company stock that lands in their lap on a single day, and they have to make this huge decision all at once.

What we normally do with clients is encourage them to identify, to clarify what is truly important to them in their lives. Buying a home? Taking a sabbatical next year? Putting their child through college? Early retirement? 

Whatever it is, ask yourself: 

How much money will it take to fund this goal? Now, consider selling enough company stock to fund that goal. To secure that goal. 

In my opinion, what happens to the rest of your company stock is now way less important. Because you’ve funded that which is most important to you.

Well, the same logic applies now. Is there something that is profoundly important to you? Consider selling enough company stock (yes! even at these low prices!) to fund that goal, and then you can hold the rest of the shares.

Because, you know what? The stock can always go lower. As we’ve seen day after day, week after week, for the last year.

Sure, this isn’t ideal. Sure, this would have been better to have done several months ago. And I know that regret is pretty much impossible to avoid. I suffer from it myself. But the best you can do is make a decision with what you have now, not what you had then.

Sell all.

I can think of three reasons to sell all:

  1. Your situation is the opposite of “Continue to hold all.” You need the money from your company stock to create the life you want, to fund the goals that are important to you.
  2. You’ve finally learned that making bets on your company stock just isn’t worth the stress and confusion, and you realize you are in fact not good at predicting company stock prices.
  3. You have any clue what modern portfolio theory is, and you’ve accepted it.

Other Important Things to Know

Fancy Tactics

You might hear talk about limit sales or collars or exchange funds or put options or any number of other tactics. But rest assured, these are tactics, not strategies.

What I’ve listed above—hold, sell some, sell all—that’s the strategy, informed by your personal circumstances. 

You can choose to be fancy in your implementation, if you’d like. (I generally don’t. Fancy = usually more expensive, more complicated, takes up more brain space, and easier to screw up.) But you shouldn’t choose these tactics before getting clear on the why and what of the strategy.

You know who our happiest clients are? The ones who Just Sold That Sh*t and then went on to live their lives, not caring if they could have optimized this way or that. They got the cake and didn’t worry about the icing. And they’re happy and generally don’t feel regrets.

In my experience, the more you try to optimize, the less happy you are.

Selling at a Loss Can Lower Your Taxes, Now and in the Future

The decision to hold or sell your shares should be an investing and life-driven decision, not a tax one. That said, there’s one thing you should know about taxes that might lighten your emotional burden a bit:

If you sell company stock now, at a loss, you will create for yourself a capital loss. You can use those capital losses to offset any capital gains you have. (You’d have a capital gain if you sold a stock after it had risen in price.) If you have a capital gain, normally you’d owe taxes on it. But if you have a capital loss that cancels it out, you don’t owe tax.

Additionally, this capital loss can carry forward to future years if you don’t have enough capital gains this year to “use” them all up. 

A more minor benefit: you can use up to $3000 in capital losses each year to offset ordinary income (i.e., your salary, bonus, or RSU income). If your total tax rate is 40%, say, then offsetting $3000 in ordinary income will save you $1200 in taxes. That likely won’t change your life, but it’s a nice consolation prize.

Did You Sell Some Company Stock Last Year? Take the Win!

It is all too easy to look at the mistakes you’ve made and ignore the good decisions you made. (I knooooooow.)

So, you’re probably looking at your company stock right now, worth a quarter or a half as much as it was last year, just kicking yourself for not having sold it last year. 

But did you sell any last year? We have plenty of clients who sold lots, just not all of their stock last year. 

We encourage them to look at how much money they got from the stock they did sell last year. That’s a win! Whether it was luck or part of a considered strategy, don’t just look at the shares you made a mistake with, which is obvious only in retrospect. 

Look at the shares you got right! You, my friend, are a (perhaps tiny) genius.

It takes guts.

Some of the bravest clients we have, in my opinion, are the one selling their company stock at times like this. 

Fear and anxiety are ascendant, but they have chosen to prioritize their goals, their values, and their well-thought-through logic over wishful thinking and abstract notions of the purpose of money.

In closing, a random Golden Girls anecdote: I had a friend in high school who asked me which Golden Girl he was most like. I said Sophia. He was irritated because he really wanted me to say Dorothy. And for good reason.

Do you want someone to help guide you in creating a strategy for your company stock that will give you confidence and reassurance? That will help support what is important to you in your life? Reach out and schedule a free consultation or send us an email.

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Disclaimer: This article is provided for educational, general information, and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. We encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Flow Financial Planning, LLC, and all rights are reserved. Read the full Disclaimer.

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