Double-Trigger RSUs at Private Companies

What Are Double-Trigger RSUs?

Double-trigger RSUs require two conditions to fully vest and be taxable:

1. Time-based vesting (the first trigger)
2. Liquidity event (the second trigger)

Until both triggers occur, you don't receive shares or owe taxes.

Why Private Companies Use Double-Trigger

Tax Problem with Single-Trigger

At private companies, if RSUs vest normally:

• You'd owe taxes when shares vest
• But you can't sell shares to pay taxes
• You'd need cash from other sources

Double-Trigger Solution

By requiring a liquidity event:

• No taxes until you can sell
• You can use proceeds to cover tax bill
• Less financial stress for employees

Liquidity Events That Trigger Vesting

IPO (Initial Public Offering)

Company goes public, shares become tradable.

Acquisition

Company is bought; usually triggers immediate vesting.

Direct Listing

Alternative to IPO; company lists without raising new capital.

Tender Offer

Company or investors offer to buy employee shares.

How Double-Trigger Vesting Works

Example Timeline:

Year 1: 25% time-vests (no shares/taxes yet) Year 2: 50% time-vested Year 3: 75% time-vested Year 4: 100% time-vested

If IPO happens in Year 3:

• 75% of grant immediately vests and is taxable
• Remaining 25% vests on original schedule

Tax Implications

At the Liquidity Event

All time-vested RSUs become taxable at once. This can mean:

• Large one-time tax bill
• Potentially pushed into highest tax bracket
• AMT considerations

Planning Ahead

• Estimate tax liability before event
• Understand lockup restrictions
• Plan for withholding or payment

Leaving Before Liquidity

What happens to your double-trigger RSUs if you leave?

Common Scenarios:

Early departure (before time vesting):

• Unvested portion forfeited
• Time-vested portion may be kept or forfeited (depends on plan)

Post-time-vesting departure:

• Usually keep time-vested portion
• Still need liquidity event to receive shares/owe taxes

Important: Check your specific plan documents - policies vary significantly.

Double-Trigger vs Single-Trigger

Key Considerations

Valuation Uncertainty

Private company values are estimates. Your RSU value could be higher or lower at liquidity.

Timeline Risk

If the company never goes public or is acquired, the second trigger may never occur.

Employment Requirements

Some plans require continuous employment until liquidity event.

Questions to Ask HR

1. What events count as a "liquidity event"?
2. What happens to time-vested RSUs if I leave?
3. Will there be a lockup period after IPO?
4. How is the stock price determined for taxes?