On Friday, August 25th, 2023, Klaviyo finally filed its S-1 (a public document filed with the SEC to kick off the IPO process). If you are a Klaviyo employee… woohoo! This is amazing news. You may be feeling excited, stressed, anxious and confused all at once …. and that’s totally normal.
If you have equity in Klaviyo, this potential liquidity event could be life changing upon a successful IPO. It could also have little impact on your life if the IPO goes poorly. Welcome to the rollercoaster of having equity in a company that is going through an IPO – you are unfortunately at the mercy of the stock market to determine the fate of your equity value & financial future. Sound scary? I don’t blame you.
What should you expect in the upcoming months? It will be crazy… but we’re here to help. While you can’t control the outcome of the IPO, you can control how you plan for it. This blog mini-series will be broken down into the following parts to help you best prepare for the IPO:
Part 1 (this blog!): The logistics of the Klaviyo IPO and connecting the IPO event to your life goals & values.
Part 2: 5 Mistakes to avoid with Klaviyo’s IPO.
Part 4: Pulling it all together… what to do post-Klaviyo IPO.
Ready? Let’s get started!
The Klaviyo IPO logistics
It’s not clear when exactly Klaviyo will list on the New York Stock Exchange (NYSE), but it will likely happen pretty quickly. Information moves at lightning speed and you should expect things to change daily.
As a Klaviyo employee, you should expect some internal meetings & webinars about the IPO process, but in our experience, this can be very confusing. Providing complex financial & tax information to employees where the stakes are high and everyone’s financial situation is different… it’s an uphill battle to fight.
When Klaviyo does start trading, it’s going to provide you with an amazing chance to cash in on some of your equity… but not right away.
Plan for a lock-up period
It likely wouldn’t be a great look for Klaviyo to ask outside investors to buy company shares, just for employees to turn around and immediately sell them. Introducing… a lock-up period.
A lock-up period is a pre-specified period of time where employees can’t sell their stock. IPOs usually have a lockup of 180 days… sometimes longer. Some companies may allow you to sell a certain % of shares on IPO day, but don’t expect it to be a large amount.
This means that you will likely be at the mercy of the stock price for at least 6 months. This can be an emotional rollercoaster, especially since stock prices tend to be very volatile in the first year after an IPO. You may log into the financial provider (ex – Fidelity) where you stock is and see a life changing dollar amount… but you can’t touch it. We have clients that work at Boston-based Ginkgo that went public in September 2021 and by the time they could sell the stock, the price had dropped nearly 70%!
Expect open trading windows
Once the lock-up period is over, you will be ready to sell shares, right? Well… maybe. As a now-publicly traded company, you will likely be subject to blackout periods and open trading windows. What does this mean in plain English?
You will likely be restricted on when you can actually sell the shares. For example, it’s very common for companies to restrict employee trading right before, during & after earnings are announced quarterly. Therefore, you may only have a limited number of opportunities to sell your equity… even after the lock-up period!
You may need to implement a 10b5-1 plan
Depending on your position in the company and/or possession of “material, non-public information”, you may need to implement a 105b-1 plan in order to sell your shares. What the hell is that?
Well… it’s basically a pre-established program to automatically sell your company stock at certain dates and prices in the future. As a public company, you are prohibited from trading the stock if you possess “material, non-public information” which could significantly impact the stock price. Have you ever heard why Martha Stewart went to jail? Insider trading. It’s serious and must be avoided. A 10b5-1 plan works around this because you are making decisions now for future sales.
Klaviyo should inform you whether or not this is required which is dependent on your role within Klaviyo.
Connecting the Klaviyo IPO to your life
The most… MOST important piece of advice that we can provide you – get clear about what an ideal life looks like to you so it can form a “why” for this IPO.
The #1 mistake that we see in financial planning is that people don’t know what they are financial planning for. It’s like boarding a plane that doesn’t have a destination.
Now, this is a lot more complicated than it sounds. People don’t typically know exactly what their ideal life looks like, but having some type of vision is incredibly powerful. This vision (which can and will change) will provide a grounding, values-based way to formulate a plan for your Klaviyo equity. It will help you answer “what’s at stake?” and “what’s this money for?”. It’s not enough to say you want to just maximize your net worth… you ideally want to maximize your life.
For example, you may want to use money for:
- Buying/upgrading a home
- Taking some bad-ass trips or a sabbatical
- Changing jobs/career
- Starting a business
- Saving for college
- Paying down debt
So how do you start? Ask yourself this question (which is one question we use with our clients).
I want you to imagine that you are financially secure, that you have enough money to take care of your needs, now and in the future. The question is, how would you live your life? What would you do with the money? Would you change anything? Let yourself go. Don’t hold back your dreams. Describe a life that is complete, that is richly yours.
Write out your answers. If you have a partner, have them write out their answers and talk about it. Sleep on it for a while.
This creates a lens through which the Klaviyo IPO decisions can be made, especially before we dive deeper into this mini-series with more tactical decisions. Before decisions get more difficult & emotions are high, you are providing some “rules of the game” to help ground you when decisions like exercising options, selling shares, etc. are in front of you.
It’s very likely that when Klaviyo goes public, you will see a very large % of your net worth now tied up into the Klaviyo stock. It’s like being in an elevator held up by one cable. If that cable snaps, your life goals are going down with it.
You are approaching an amazing opportunity to make significant wealth… now let’s be sure that you keep it so you can use your money in a way to enhance your life.
Thanks for coming to my TED talk.
Key takeaways
- Expect an emotional rollercoaster with the IPO. Information changes fast and the decision stakes are high.
- Once Klaviyo goes public, you will likely have at least a 6 month lock-up period where you can’t sell any equity. In addition, you will likely be subject to trading restrictions afterwards. Therefore, you will need to plan ahead around these key dates.
- Now is the time to define your “why” for this IPO. How can this money improve your life? What’s it for? What’s at stake? Just like a company, you need to start with vision (your ideal life) before you make tactical decisions. This will provide a grounding “rules of the game” to help ensure you are making decisions with the IPO that are aligned with your values & your life.
- Would you find value by receiving the subsequent Klaviyo IPO blog posts in this series? Sign up here so you are the first to be notified when the blogs are posted.
- Are you interested in exploring how our financial planning services can help you during this IPO process? Visit our home page here to schedule an introductory meeting.
About Experience Your Wealth, LLC
EYW was established in 2019 – our home “offices” are based in Rhode Island (Jake), Tennessee (Marie) and Arizona (Mike + Lillian) as we operate remotely and work with clients from all around the US.
We provide virtual, fee-only financial planning services to travel-loving young families who don’t buy into the traditional “9-5, work-until-you’re-65” concept. We help you find the responsible balance between paying down debt, investing for the future, but also experiencing life now.
We have deep expertise as it relates to equity compensation, including existing knowledge & familiarity with Klaviyo’s equity.
Our team includes Certified Financial Planners (CFP®), Certified Student Loan Professionals (CSLP®), a Chartered Financial Analyst (CFA) and a former Certified Public Accountant (CPA) as we love to nerd-out on the technical side of financial planning, but our true passion lays with the “personal” side of personal finance – helping our clients articulate & visualize their dream life and then best align their financial decisions with their life.
We’re shaking up the financial planning industry by bringing modern, life-centered financial planning advice and personal CFO-level service to our clients. We are completely remote, paperless and meet clients over Zoom with frequent guest appearances from kids, dogs, cats and whatever fun animals that may be around your home.
Disclosures
None of the information provided is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement, of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. The content is provided ‘as is’ and without warranties, either expressed or implied. Experience Your Wealth, LLC does not promise or guarantee any income or particular result from your use of the information contained herein.