More than 844 U.S. companies went public via an initial public offering (IPO), a direct listing, or a special purpose acquisition company last year, setting a new record for public departures (SPAC). According to PitchBook, 410 similar companies went public in 2020, a 105 percent increase.
Employees with stock options in the 20 greatest U.S. IPOs generated an estimated $41 billion in pre-tax value. The fact that there has been a surge in public company exits is fantastic news for founders and investors, but what about employees who given stock options in those companies.
To find defining trends for employees from late-stage unicorns in 2021, we dug into our proprietary data as well as publicly available data filed with the US Securities and Exchange Commission. Here is a rundown of what we discovered:
Employees may have saved money on taxes if they had exercised their stock options prior to the firm going public. Employees at startups paid an estimated $11 billion in avoidable taxes in 2021 by executing their stock options after the company had exited rather than before.
Secfi clients spent an average of $543,254 to exercise their pre-exit stock options in 2021 (nearly double their annual household income), with taxes accounting for 73% of the expenditure. Employees at companies that went public in 2021 saved an average of approximately $415,000 by executing their stock options prior to the IPO.
Pre-exit stock option exercise rates range from 2.4 percent on the low end to over 77 percent on the high end, which could indicate employee trust in their company. In 2021, $11 billion in useless taxes will pay.
According to a Secfi estimate of 172 U.S.-based, VC-backed public exits in 2021, workers working at VC-backed U.S. businesses that went public paid an estimated $11 billion in extra taxes because they waited to exercise their stock options post-exit. Employees may have saved money on taxes if they had exercised their stock options prior to the firm going public. It is also possible that doing so would have maximized their profits when it came time to sell their stock. High stock option exercise fees remained a major barrier to early stock option exercise in 2021.
