At SpaceX’s market debut on June 12, the perfect trade already looked obvious. Shares priced at $135, valuing the company at roughly $1.8 trillion, and closed near $161, pushing its market capitalization above $2.1 trillion. Four days later they reached $225.64, and for one brief week the chart resembled the trajectory of one of the company’s own rockets.
Then gravity returned.
Seven weeks later, SpaceX trades below $110, far below its IPO price. More than $1 trillion of market value has evaporated from the peak. Most employees could do nothing but watch because their pre-IPO shares remained locked up.
In hindsight, the right trade is obvious. In real time, it never is.
What makes SpaceX different isn’t simply the size of the IPO. It is the scale of wealth it transferred into the hands of employees. Few public offerings have created so many paper millionaires so quickly. A position worth $50 million may look life-changing, but it is still only paper wealth. Before a single share can be sold, market volatility, taxes and trading restrictions will determine how much of that fortune actually survives.
Unlike a traditional IPO, there is no single day when employees suddenly become liquid. SpaceX replaced the familiar 180-day cliff with staggered release dates that resemble stage separation. Portions of employee holdings become eligible after second-quarter earnings, additional tranches follow throughout the fall, the principal lockup expires in December, while other holdings, including Elon Musk’s, remain restricted until June 2027. Even after shares become eligible for sale, trading windows, blackout periods and securities-law restrictions may continue to delay transactions.
The calendar, not the stock price, has become the scarce resource.
The debate naturally centers on whether employees should sell or hold. Yet history suggests neither answer is universally correct.
Netflix created one of Silicon Valley’s greatest fortunes for employees who ignored conventional advice and remained heavily concentrated. Diversification would have reduced risk, but it also would have dramatically reduced wealth. The lesson is not that diversification is wrong. It is that the best financial outcome and the best financial decision are rarely the same thing.
The more interesting question is what can be accomplished before the first shares are sold.
Ironically, a declining stock price often improves the most valuable planning opportunities. The federal estate and gift tax exemption now stands at $15 million per person. Transferring shares to heirs or irrevocable trusts after a decline consumes less of that exemption while allowing future appreciation to occur outside the taxable estate. Volatility also improves the economics of techniques such as grantor retained annuity trusts, which are specifically designed to transfer future appreciation with minimal gift-tax cost.
Employees holding incentive stock options face a similar opportunity. Because alternative minimum tax exposure is driven largely by the spread between exercise price and fair market value, lower prices can substantially reduce the tax cost of beginning the long-term holding period.
Timing matters elsewhere as well. Equity compensation frequently produces a gap between tax withholding and actual tax liability, particularly for highly compensated employees in California. A December sale and a January sale may be separated by only days, yet fall into different tax years, creating flexibility to manage income recognition, estimated tax payments and cash flow.
The earliest employees should investigate one additional question before selling anything: whether their shares qualify for the federal Qualified Small Business Stock exclusion. For stock issued during SpaceX’s earliest years, when the company was still a startup, the benefit could shelter millions of dollars of capital gain. Once shares are sold, the opportunity is gone.
The same principle applies to charitable planning. Appreciated stock donated directly to charity or a donor-advised fund generally avoids capital gains tax on the embedded appreciation. Selling first and donating cash does not.
California adds another layer of complexity. Many employees assume moving out of state before selling automatically eliminates California tax. It often does not. The compensation element of equity awards generally remains taxable to California based on where the services were performed, even if the employee later establishes residency elsewhere. Understanding where compensation ends and investment appreciation begins can be worth millions.
None of this answers the question every employee is asking: Where does SpaceX stock go next?
No adviser can answer that.
The better question is one only the employee can answer: If this entire fortune were already sitting in cash today, how much would you invest in SpaceX?
Everything else, the lockups, the tax elections, the trusts, the charitable gifts, is simply a framework for acting on that answer.
SpaceX taught its employees to think in terms of launch windows. Their financial planning now requires the same discipline. The goal is not simply to become a millionaire on IPO day. It is to remain one long after the headlines have faded.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
