Planning for the unknown can be challenging, but projecting lifetime cash flows through thorough analysis and well-developed assumptions can go a long way in clearing up an otherwise murky situation.
Recently, Jim and Sandy came to First and Main Financial seeking financial assistance. Their focus was to gain a better understanding and become more comfortable with what their future would hold once recently granted pre-IPO shares were vested.
Like many families, they were juggling two careers while raising two children, both in grade school. Jim had recently started a new job with Uber (pre-IPO) and was awarded restricted share units (RSUs) upon being hired. Sandy was busy with her career as well, owning and running her own salon. They wanted to understand their current and future cash flow situation more clearly and re-evaluate their college savings and retirement goals; making certain they were on the right path for success.
We reviewed their current and projected living expenses as well as future income. With the new job at Uber came an initial grant of RSUs as well as on-going grants annually. Both types of grants would vest based on a pre-determined schedule once certain requirements were met. The requirements were time-based (beginning one year after hire date) and performance-based (IPO), and both would need to occur for the initial shares to vest. There would also be a six-month lockup period after the IPO, where no RSU’s could be sold.
We spent a significant amount of time combing through the plan summary documentation to gain an accurate representation of what was granted, when the shares would vest and over what period of time the vestings would occur. We determined when the taxes would be withheld and when the shares could be sold and provided guidance on whether to sell or hold on to company shares. We finally discussed and agreed on an estimated IPO date and price to use in our initial model.
Once the comprehensive financial plan was ready, we sat down with Jim and Sandy and walked them through the model. We reviewed all the areas of the financial planning process and spent additional time on what-if scenarios associated with the RSU vestings. The exercise was very helpful in setting expectations, but we knew we would revisit the plan once the IPO was scheduled.
The Uber IPO happened in May of this year and the post-IPO lockup period has recently ended. We’d gotten back together with them prior to the lockup period to review the updated plan, which now contained the known IPO details and up-to-date vesting information. The final result was a robust, easy to maintain plan that would specifically keep track of all RSU’s granted and sold by Uber and also support additional selling by our clients.
If you are looking for financial guidance, whether it be for a one-time financial plan or continuing advice on your investments, we invite you meet with a First and Main financial advisor for a free consultation. We would be more than happy to sit down with you, assess your current financial situation and review with you our services to help you navigate your own financial future.
