Post-IPO insider planning

IPO lock-up expiration and Rule 144: what actually changes on day 181.

The 180-day IPO lock-up is a contract, not a securities regulation. On day 181, the contract lifts — but for affiliates, a separate regulatory regime immediately takes over. Rule 144 imposes volume limits, manner-of-sale requirements, Form 144 filings, and a current public information condition on every sale by a current executive, director, or holder of 10% or more of the company's stock. Those conditions do not expire.

The 180-day lock-up: what it is and what it isn't

The SEC does not require any specific lock-up period. The restriction is a private contract between the company, its insiders, and the underwriting banks. The standard term is 180 calendar days from the IPO pricing date, though some offerings use shorter windows, cliff-and-ratable structures, or permit early release at the underwriters' discretion after the 25-day quiet period ends.

The lock-up serves the underwriting process — it prevents insider selling from destabilizing the offering in the weeks immediately after it prices. It does not exist to satisfy securities law. That is Rule 144's job, and Rule 144 runs on a different clock entirely.

After lockup: affiliate vs. non-affiliate

Non-affiliates

If you have been out of the company for more than 90 days and hold under 10% of the relevant class, you are no longer an affiliate. For restricted securities of a reporting company, Rule 144 requires only a six-month holding period before unrestricted resale. Because the IPO lock-up itself lasts 180 days, that holding period is almost always satisfied by the time the lock-up expires — meaning former affiliates and non-affiliate investors can typically sell without volume limits once the lock-up clears.

Current affiliates

If you are currently an executive officer, a director, or a 10%-or-greater shareholder, you remain an affiliate. Affiliate status means Rule 144's volume limits, manner-of-sale rules, Form 144 filing obligations, and current public information requirements apply to every sale — indefinitely, and regardless of whether the shares were registered in the IPO's S-1.

That last point matters. Even if your shares were registered as part of the offering or a concurrent resale registration, the issuing of a registration statement does not eliminate the affiliate's compliance obligations. The SEC considers control securities — shares held by affiliates — subject to Rule 144 regardless of registration status.⁴

Volume limits: the operative constraint for most affiliates

Under Rule 144(e) (17 CFR § 230.144(e)), the maximum an affiliate can sell in any rolling three-month period is the greater of:

• 1% of the outstanding shares of the same class, based on the most recent published issuer report, or
• The average weekly reported trading volume during the four calendar weeks preceding the date Form 144 is filed — or, if no Form 144 is required, the date the broker receives the sell order.⁴

For OTC-traded securities (Pink Sheets, OTC Bulletin Board), only the 1% prong is available.

Note that this is a rolling three-month lookback, not a calendar quarter. If you sell on September 15, count back to June 15 and total every affiliate sale in that window. Any prior sale reduces the remaining headroom for the current one.

Example: two scenarios

A founder holds 4 million shares. The company has 80 million shares outstanding. Two scenarios based on trading volume:

Use the Rule 144 volume limit calculator to estimate the three-month ceiling for your specific stock.

Why volume limits aren't the only planning input

Even if Rule 144 permits selling 800,000 shares per quarter, doing so at the maximum each quarter may not be the right financial plan. Post-lockup affiliates typically need to weigh:

• Market impact. A large sell order at the Rule 144 ceiling can still create visible selling pressure, especially in lower-volume stocks. Institutional investors and analysts watch Form 144 filings and insider sale activity closely. A plan that looks aggressive from the outside can affect price and market perception.
• Tax year spreading. Concentrating a large sale in one calendar year can push all proceeds into the highest long-term capital gains bracket. Spreading sales across two or more tax years can reduce the marginal rate on a portion of the gains. For 2026, the 20% long-term rate begins at $545,500 taxable income for single filers and $613,700 for married filing jointly.¹ Net investment income tax (NIIT) adds 3.8% on investment income above $200,000 (single) or $250,000 (MFJ).²
• Concentration reduction. Many founders and executives enter the post-lockup period with 80–100% of their net worth in a single stock. The financial plan should define a target single-stock exposure and a timeline for reaching it — that target, not the Rule 144 ceiling, should drive the sale cadence.
• Upside retention. A forced-liquidation pace that ignores the founder's view on the company's trajectory is not a plan — it is a liquidation. A deliberate financial plan can build in a long-term position target that balances risk reduction with continued upside exposure.

Tax treatment of post-lockup sales

Most founder and early investor shares will have been held for years before the IPO, satisfying the one-year holding period for long-term capital gains treatment many times over. Post-lockup sales on those shares are almost always taxed at LTCG rates, not ordinary income rates.

The tax basis depends on how the shares were acquired. Founders' shares (original restricted stock grants at near-zero price) typically carry basis near zero, making nearly all sale proceeds a gain. Early investors who purchased in a Series A or B at $2–$5/share will have a lower basis relative to typical IPO prices, but a meaningful basis nonetheless.

Executive officers who received stock options or RSUs must treat each grant separately. Non-qualified stock options (NSOs) create ordinary income on exercise equal to the spread; the holding period for LTCG starts from exercise, not grant. RSUs are taxed as ordinary income at vest; the LTCG period starts from vest. The lockup shares from option exercises or RSU vests may not yet satisfy the one-year LTCG threshold at lockup expiration, depending on when the exercise or vest occurred.

For large positions, the combined federal tax on gains above the top bracket is 23.8% (20% LTCG + 3.8% NIIT). State taxes compound this further — California taxes LTCG as ordinary income at rates reaching 13.3%, and New York adds up to 10.9%.

10b5-1 plans for post-lockup selling programs

A Rule 10b5-1 trading plan lets an affiliate schedule a structured selling program in advance, while not in possession of material non-public information. Once in place, the plan executes trades automatically at preset prices, quantities, or dates — removing discretionary decision-making from each sale and providing a legal safe harbor from insider trading liability.

The SEC's 2022 amendments to Rule 10b5-1 require a mandatory cooling-off period before the first trade under the plan:³

• Directors and Section 16 officers (executive officers): the later of (a) 90 days after plan adoption, or (b) two business days after the company files the quarterly earnings report covering the fiscal quarter in which the plan was adopted — whichever is later, capped at 120 days from adoption.
• Non-officer affiliates (e.g., a VC fund holding 15% of the company, a former executive who is still an affiliate by ownership alone): a 30-day cooling-off period.

A 10b5-1 plan does not override Rule 144 volume limits. Sales under a plan still count toward the three-month ceiling. The plan's sale schedule must be designed so that no three-month window exceeds the applicable Rule 144 limit. The financial plan should coordinate the two constraints before the plan is adopted.

Setting up a 10b5-1 plan immediately after lockup expiration (before the next trading window closes) lets an executive establish the structure during a known-open window. The cooling-off period then runs before the first trade, keeping the legal setup clean.

Form 144 filing

Affiliates selling more than 5,000 shares or more than $50,000 worth of stock in any three-month period must file Form 144 with the SEC concurrent with the order to sell. Post-lockup, nearly every meaningful affiliate sale hits both thresholds. The filing is made on EDGAR and becomes publicly visible, which is another reason sophisticated sellers use pre-planned programs rather than reactive, discretionary sales. See the Form 144 filing guide for timing requirements, EDGAR instructions, and common mistakes.

What the financial advisor does in this process

Securities counsel advises on eligibility, affiliate status, Form 144 drafting, 10b5-1 plan structure, and Rule 144 compliance. The broker executes and often has a restricted-stock desk that coordinates with counsel and the transfer agent. The financial advisor's role is different: modeling the financial plan around the parameters that securities law and the broker establish.

Specifically, the financial advisor addresses:

• How much of the concentrated position should be reduced, over what timeline, to reach a defined diversification target?
• What is the optimal sale cadence across quarters and tax years to manage the blended effective rate on proceeds?
• If charitable vehicles are part of the plan — a donor-advised fund (DAF), charitable remainder trust (CRT), or direct gift of appreciated shares — how do those integrate with the sale timeline?
• What investment policy governs the post-sale proceeds? Asset allocation, risk tolerance, liquidity needs, and estate planning goals all shape the reinvestment plan.
• How does the remaining equity position fit into the overall estate and financial plan, including the $15M per-person estate tax exemption (permanent under OBBBA)?

For large concentrated positions, the decisions made in the first year after lockup expiration compound significantly. The financial planning work is not an afterthought to the securities compliance process — it is the reason both processes exist.