S04 E14: IPOs, executives and volatility: Equity trends to look out for

As market volatility continues and IPOs (Initial Public Offering) and M&A (Mergers & Acquisitions) activity ramp up, executives face critical decisions about their vesting stock plans. From insider trading rules to transaction restrictions and regulatory hurdles, the stakes are high - especially for those transitioning from startup environments.

Tune in to the latest episode of the Prosperity at Work podcast, where we break down what you and your executives should be aware of. 

In this episode, you’ll discover:

·         How market volatility impacts vesting and sales windows

·         Strategies for deciding what to do with vested stock

·         Why 10b5-1 planning is more important than ever

·         The evolving role of AI in executive education

Don’t miss out on insights from Bob Fritz, Head of Executive Advisory, J.P. Morgan Private Bank and Chris Dohrmann, Strategic Partnerships at Workplace Solutions that can help you make informed decisions in 2026 and beyond. 

This podcast 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. This podcast 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.

Transcript

Chris Dohrmann  0:05  

You're listening to Prosperity at Work from JP Morgan, Workplace Solutions, the podcast all about equity compensation, financial, well-being and more. I'm your host, Chris Dohrmann, I'm joined today by Bob Fritz, head of Executive Advisory at JP Morgan Private Bank, to discuss IPOs, executives volatility, basically the topics that we think are going to be the main equity compensation trends in Q1 2026, and beyond. Welcome to the show, Bob. 

Bob Fritz: 

Thanks for having me. Great to be with you today. 

Chris Dohrmann  0:33  

It's great to have you back. I know you're very busy, so let's get right into it and look at vesting Q1 2026, we'll see the vesting of PSUs and RSUs that were awarded, say, three years ago, because of where the market is right now, they are probably very valuable. What should someone do with them?

Bob Fritz  0:51  

Well, like, that's a big question, and it's a busy time of the year, because most companies in the US anyway, are, you know, having their RSU and PSU vestings happening now. No precise date depends on the company plans, but it's typically end of January, February into March, and most executives will ask themselves, what should I do with the stock, assuming they're in a position to sell, meaning they don't have share ownership requirements, or there's some other intra company or internal to the company issue on selling the stock, then they ask themselves, should I sell now or not? One thing to keep in mind is what has happened to the overall stock market in the last three years, when, in this example, the company has granted the RSU, or PSU, to use one benchmark, the S&P500, the US, S&P500 is up about 75% in the last three years. That would probably mean in most cases, or would mean in most cases, that the company stock is up significantly higher than what it was granted to an executive three years ago. And that's on the RSUs. On the PSUs, there could be yet additional value to be gained, because the performance trigger may have been met, and the payout on that PSU could be at more than 100% of the original grant value. Could be 120, 130 could be a decent payout. In this environment, we're going to come across a lot of executives that are having, because either the stock prices performed well, or the performance metric has meant that the payout is going to be a lot higher, so executives are going to be coming into kind of a big decision here as we enter this time of the year.

Chris Dohrmann  2:33  

There is more to consider when exercise than just the Black Scholes model. Is there anything else that an individual should consider?

Bob Fritz  2:39  

There's a lot that goes into a decision to sell a stock exercise an option more than just particular point in time or a particular stock price. If you hit a crystal ball and you knew exactly the high point of the stock that's when you would obviously sell, but I think that managing the overall concentration for an executive is another huge aspect of what an executive needs to consider. They're so tied to the company stock, they get so much of it, and they even though they get investing now we'll talk about this in a minute, they'll get another granting of RSUs and PSUs, or additional options along the way, during the point of the year. So think about just kind of managing that overall stock concentration. And think about a couple of things. One, 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 asset, some other diversified asset that you could invest in. And you think about too, if you sell and your own company stock moves higher, is that a bad thing? I don't think it's bad thing. I think it's a good thing because all of the other stock that you can't sell because it's not vested or you don't have access to it right away, that's all moving higher. So, you know, executives are hesitant to sell sometimes because they're unsure about the stock price, I try to get people away from that a little bit because of the overall concentration, and again, because if they think the stock could move higher, they've got so much other wealth tied to the stock that they can't diversify away from right now. So it's not the worst thing in the world, by the way, the stock price could go down. And if you have an opportunity to sell and your own company stock price declines in value, you've missed a real opportunity to sell it at an attractive price and reinvest those assets someplace else as much as you can. Everything that's unvested or you can't touch it this time, there's nothing you can do with it anyway.

Chris Dohrmann  4:36  

I think you did a great job putting that in context for what the individual executive has to consider. So, another statement that's important to think about when they have their account is, can you sell? And you've already mentioned this, is this something you can actually do at the point that you want taking into account rule 10b5-1?

Bob Fritz  4:54  

The easiest thing to do if you have the ability is and you've got the desire to sell. A recently. Vested RSU or PSU or some other form of equity, just simply sell it during an open window period. Since RSUs and PSUs, once they vested, have already been taxed, then you've got very little gain or loss after that point. So you sell them right sort of soon after they vest to you, there's very little gain or loss on that. So there's really no taxation, because they are essentially already been taxed. What we're seeing in our practice is a broader use of 10, p5 ones in this environment. And why is that? You know, the current environment is conducive to more merger and acquisitions out there, and executives don't want to be in a position where they'd like to sell but can't, because they have been involved in some of those merger and acquisition discussions. Think about this. An executive is involved in meetings. There's some sort of corporate transaction that could be happening in the future. And then, separate from that, they want to go out and sell the stock, they seek approval from the General Counsel's Office, and the General Counsel could preclude them from selling because of their involvement in some of those M &A discussions that are out there by putting in place a, 10b5-1 plan, you can sell during that window or during that time period in the 10b5-1, set it up, and 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.

Chris Dohrmann  6:26  

Excellent point, and it really leads into the next topic that you had already mentioned, that I'd like to cover, is IPO and M&A activity in the current environment, we're seeing more activity than even probably before the pandemic, or at least is starting to ramp up. Is that what you're seeing?

Bob Fritz  6:41  

Yeah, we are. And, you know, it just the environment where the markets are conducive to that kind of activity, and then also the regulatory environment, which is also important, key aspect, is another factor that's kind of ramping up activity. It's out there, and the IPO market has been heating up in the last year, and we anticipate that it will continue to do so as well going forward.

Chris Dohrmann  7:03  

So as the head of Executive Advisory for JP Morgan Workplace Solutions and JP Morgan before that further, what are some of the things that executives should be thinking about? I mean, you already talked about taxes and a number of other things, as opposed to what they actually are thinking about, which is maybe just trying to get the exercise or the vesting done. The curse of knowledge here and the importance of education. just because someone is at an executive level, it's easy to assume that they already know everything they need to know, but that's not always the case.

Bob Fritz  7:36  

100% agree, and I've been doing this a long time, working with corporate executives, and they're obviously very smart, and can understand all of the comp and benefit plans and all the stock issues and everything else is out there, but they don't have time to do that, so they tend to lose sight of the big picture here, which is typically an executive has three quarters of their entire wealth tied to the company one way or another, either in the stock that they own, the stock plans that are out there, some of the other comp and benefit plans, like deferred compensation and other plans that are out there, as well as the fact that their annual compensation is tied to the company, you know, and their livelihood is tied to the company. So, you know, what we try to do is minimise that exposure whenever we can, and as much as we can, to the extent the executive is in a position to do that. So, as we mentioned, doing sales when you can, kind of reducing that exposure, because you've got so much tied to the company, our jobs is to essentially remind people of that and to take advantage of that. And there's certain ways, even if an executive is very bullish on the stock and very bullish on the company overall, there's some estate planning things that they should be thinking about, funding estate planning trust for the benefit of their spouses, doing grant toward trusts to pass some of that wealth in a very tax efficient way to children or other heirs. So even if they've got the company stock tied to it and they don't want to sell it, there are some things that could be done with the company stock to enhance their overall financial position and still maintain some of their overall wealth in the company. What we see is kind of reminding executives of the overall picture and move them away from kind of one decision point in one particular point in time on company stock price.

Chris Dohrmann  9:23  

I think that's great coverage. And the last thing I think we should mention, and of course, they need to consider, is the market performance, not just for the last three years, but I think it's probably going a little further back than that, as far as historic bull market. And they really need to consider the ramifications of that. We're painting it as if it's a difficult thing, I think it's a great thing. It's just a matter that people have to understand and really anticipate what that means for them and their equity compensation.

Bob Fritz  9:50  

People always get wrapped up when the markets are moving higher and higher, as we've seen in the last few years, people get a mindset of it's going to continue to move higher. Market forecasts are such which indicate that the overall market might have a good year in 2026. A lot of things can happen. I see a lot of executives too that they get a price in their mind, and they hold off for that price, and they wait for that last nickel, and the stock never gets there, and then something happens. Something happens in the world. Something happens with the overall market, their industry or their company stock, that drives the company stock price down, and then six months later, they say, I don't know why I held off for that certain price. If I could ever get it near that price again, I would sell, then sort of some lament around that. So, you know, I viewed as our position as advisors to our clients, just make sure that we're reminding them of the big picture and reminding them of everything that can go on with their company stock and with the markets. It can continue to higher, it can also go in the wrong direction and move lower. And it's kind of reminding people of those ramifications.

Chris Dohrmann  10:55  

Of course, no conversation is going to be complete without the mention of AI, and in that context, I think we're going to start seeing more use of advantages being identified in education and advisory service side of things.

Bob Fritz  11:07  

I would agree with that. I mean that there is continued oversight and some additional burden on companies to keep up with the regulatory environment of AI, which probably going to get more and more over time. My feeling is, while in many cases, the regulatory burden will be a drain on a company, that was always the case, you just wonder if the advantages of AI to company would be more than offset that additional regulatory drain on the company.

Chris Dohrmann  11:35  

AI is called, you know, the solution to ‘no joy work’. So I think the fact that even if it just allows people to do the things that they love, but as you mentioned, these executives are smart and they are dedicated and the fact that if they can get away from doing the minutia of some research and have it all laid out for them, all the best. So personalising communications, summarising documents, interactive chat bots and virtual assistants, all are part of the AI emergence. The issue, of course, is that the use of that powerful tool will need to have regular audits, and that's what you mentioned. Human overview, I think it's probably going to increase, as you've already said, but to ensure there is no bias or inaccuracy of the output, I think it's worth the additional scrutiny. We can expect more scrutiny and regulation as the frameworks need to be developed. 

Thank you, Bob for joining us today and for sharing your thoughts. This was really great context for what executives are seeing currently in the market. 

Bob Fritz  12:35  

Great. Thanks very much. 

Chris Dohrmann  12:36  

And that brings us to the end of this episode of Prosperity at Work from JP Morgan Workplace Solutions. 

Thanks for listening, and if you've enjoyed what we were discussing, we hope you'll review rate and subscribe to JP Morgan Workplace Solutions Prosperity at Work available wherever you get your podcasts.

You can find further insights on equity compensation, financial wellness and more by following us on LinkedIn or over at jpmorganworkplacesolutions.com, until next time that's Prosperity at Work, bye. 

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