Navigating Pre-IPO Purgatory: Insights and Strategies

Executive teams must rethink how they retain talent, manage evolving equity structures, and prepare for public life without a clear timeline.

These challenges were front and center during The L Suite: Pre-IPO Purgatory – Equity, Liquidity & Legal Strategies for Late-Stage Companies, a webinar held on May 21, 2025 where Cooley partner Ali Murata joined Rubrik’s Chief Legal Officer Pete McGoff for a candid discussion on the realities of navigating elongated IPO timelines, equity award management, and liquidity planning. Drawing from real-world experience, the conversation offered practical insights for companies operating in this extended pre-IPO phase. Below are key takeaways from the conversation.

Overall market: Glass half full versus glass half empty

The marketplace is showing some activity, which is a positive sign. However, it’s crucial to remain flexible and not be overly committed to a single solution. The ability to pivot thoughtfully and nimbly is essential, especially in a volatile market.

Managing equity rewards and retention

In these uncertain times, companies are getting creative with equity rewards and retention strategies. Providing limited liquidity for “must be present” restricted stock units (RSUs) is one tool in the box, but this must be applied carefully to balance retention and incentive value alongside cash availability and long-term context. This CLO, for instance, saw a robust secondary market for option holders but faced challenges with RSU holders who couldn’t sell their shares.

Dilution and equity awards

Companies often move from options to RSUs to curb dilution, as RSU awards are full-value awards. However, RSUs come with their own set of challenges, such as the inability to participate in secondary markets. Some companies are now providing both options and RSUs or reverting to granting options to address these issues. Additional complexity is present where 409A valuations are volatile, so this is again an area where you should proceed carefully. Balancing talent retention with dilution pressure is a delicate act.

Staying private longer

Companies electing to stay private longer have access to cash and can solve for RSU expiration or provide liquidity for expiring options. Alternatives like extending loans to cover exercise prices or withholding taxes can be complicated but necessary.

Settlement and withholding

Legal and business factors generally make “stay to play” through a liquidity event the way to go, though settlement timing needs to be precisely evaluated, including the very nuanced difference between the end of the lock-up period and the S-1 becoming effective. The company’s choice of tax withholding mechanism, while deceptively seeming like a technical tax issue, can potentially impact stock price – e.g., net settlement versus sell to cover. Advance planning, working with bankers, understanding your float for the whole first year and educating employees can help prevent frustration.

Key takeaways

The pre-IPO period is a time for companies to get their ducks in a row. Training employees, planning equity scenarios and understanding tax implications are critical steps. Companies must lean in and use this time to prepare for the public market. Navigating the pre-IPO purgatory requires a thoughtful and flexible approach. By staying ahead of timing risks, managing equity rewards creatively and planning for the long term, companies can turn this challenging period into a strategic advantage.