Executives can find themselves facing big decisions around vesting awards, especially when you factor in market volatility, and increased Initial Public Offering (IPO) and Mergers and Acquisitions (M&A) activity. Bob Fritz, Head of Executive Advisory at J.P. Morgan Private Bank, looks at the potential pitfalls facing executives, with insider trading rules, transaction restrictions and regulatory hurdles all especially relevant for those transitioning from the startup environment.
To hold or to sell?
Market performance over recent years means that many executives potentially have stock awards, such as Restricted Stock Units (RSUs) and Performance Stock Units (PSUs) vesting that are worth significantly more than when they were granted. This can leave them facing a ‘hold or sell’ choice.
“The performance trigger may have been met and the payout on that PSU could be 100% or more of the original value. So, many executives are going to be coming to a big decision on this,” Bob says.
“Managing the overall concentration is another huge aspect,” he continues. “They’re so tied to the company stock and even though they get a vesting now they’ll get another granting of RSUs and PSUs, or additional options along the way, during the year. So think about just managing that overall stock concentration.”
Choosing to sell some shares doesn’t mean giving up on potential future growth either.
“At a public company if you sell or exercise an option or sell stock you’re not going to sit on that, you’re going to reinvest it elsewhere. So it’s not as if you’re going to miss out on some appreciation of some other diversified asset that you could invest in,” Bob says.
In short; being strategic, staying compliant and managing concentration risk when vested shares come due all need to be considered.
IPOs, M&As and the importance of 10b5-1 plans
However stock price isn’t the only impacting factor as insider-trading rules and company trading windows can also come into play. This is especially true for executives who are transitioning from the private to public sphere, either via IPO, M&A or spin-off, who may find themselves in unfamiliar territory, facing rules and restrictions around Material Non-Public Information (MNPI) that did not apply to them before.
“Executives don’t want to be in a position where they’d like to sell but can’t,” Bob says by way of example. “There’s always a risk of a corporate transaction happening in the future and, separate from that, an executive may want to sell stock to fund lifestyle expenses. When they seek approval from the General Counsel’s Office, the General Counsel could preclude them from selling because of their involvement in some of those M&A discussions.”
“By putting in place a 10b5-1 plan, you can sell during that window or during that time period because it was set up, presumably, before you came into any kind of insider information or something that could potentially preclude you from selling your company stock,” he says.
Learn more about 10b5-1 plans here.
The role of Executive Advisory
Time is another factor; executives often have too much on their plate work-wise to focus fully on their personal situation.
“I’ve been working with corporate executives for a long time and they’re obviously very smart and can understand all the compensation and benefit plans and all the stock issues and everything else that’s out there, but they don’t have the time,” Bob says.
“I view our position to our clients as partly being to make sure that we’re reminding them of the big picture and about everything that can go on with their company stock and with the markets.”
This includes recognizing the extent to which an executive’s wealth might typically be tied to the company through:
- actual stock held
- active stock plans
- other awards and benefit plans, e.g., deferred compensation
- annual compensation
“What we try to do is minimize that exposure whenever we can and as much as we can,” Bob says. “One of the obvious ways to do that is to sell some stock at the right time, when it makes sense to do so, because you’ve got so much tied to the company. Our job is essentially to remind people of that and help them make that work for them.”
Bob’s top takeaways for executives
- recent stock market performance means 2026 vesting season could be lucrative
- IPO and M&A activity is expected to ramp up throughout 2026
- 10b5-1 plans can allow executives to trade company stock without violating MNPI rules
- selling stock can help to manage overall exposure levels to the company
What next?
Bob Fritz appears on our Prosperity at Work podcast, streaming wherever you get your podcasts.
If you’d like to discuss employee equity compensation or learn more about how J.P. Morgan Workplace Solutions can support your business, contact us today.
This publication contains general information only and J.P. Morgan Workplace Solutions is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. J.P. Morgan Workplace Solutions’ Insights is not a substitute for professional advice and should not be used as such. J.P. Morgan Workplace Solutions does not assume any liability for reliance on the information provided herein.
This publication contains general information only and J.P. Morgan Workplace Solutions is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. J.P. Morgan Workplace Solutions’ Insights is not a substitute for professional advice and should not be used as such. J.P. Morgan Workplace Solutions does not assume any liability for reliance on the information provided herein.
