Initial Public Offerings (IPOs) were few and far between in 2023. People outside of Instacart were excited about the company’s IPO, but nothing beats the excitement of Instacart employees currently holding Instacart RSUs. 

For many Instacart employees this IPO means that they’ll be able to sell their RSUs and actually receive a benefit from them.

The purpose of this article is to arm Instacart employees with our 7 tips to manage their Instacart RSUs now that the company has successfully IPOed.

#1 - Understand RSU Terminology

Before diving into specific tips for managing Instacart (CART) RSUs, let’s go over some key terms. We’ve covered these in our RSU basics article as well as our RSU Key Terms articles, but here’s a quick refresher of the top ones.

• Grant Date - The date you receive your CART RSU grant.

• Vesting Schedule - The timeline for when your CART RSUs become CART shares you own outright. CART typically offers a 4-year vesting schedule.

• Vested/Unvested - The breakdown of CART RSUs that have been released to you versus those that haven’t. If you quit with unvested RSUs (LINK), you’ll likely forfeit them.

• Vest Date - The date your CART RSUs are released to you.

• Ordinary Income - The income type RSUs create when they vest.

• Tax Withholding - As CART RSUs vest, CART will withhold a portion for taxes (more on this next).

With these basic definitions out of the way, let’s talk taxes.

#2 - Understand How CART RSUs are Taxed

CART RSUs are taxed at two points: when they vest and when they are sold.

1. At Vest - RSUs are taxed as ordinary income.

2. At Sale - RSUs are taxed as either capital gains or losses.

All that matters for RSUs is the value they have at vest. Given the recent IPO, many CART employees had RSUs vest at the IPO price of $30.

For example, if you have 10,000 CART RSUs that vested at the IPO price of $30, you’ll have $300,000 of taxable income on the vesting date and future stock price changes won’t affect this tax liability.

Even if you don’t sell shares, the fact that you had CART RSUs vest means that you’ll owe taxes.

#3 - Understand Basics of RSU Tax Withholdings

Companies must withhold taxes from RSUs as they vest to ensure taxes are paid. Typically, companies withhold 22% if you make less than $1M and 37% if you make more than $1M.

This is crucial to be aware of if you have CART RSUs, especially if your income is $150k-$200k or more. For instance, if $300k worth of RSUs vest and 22% is withheld, but your tax rate is actually 32% or 35%, you could face a significant tax bill.

#4 - Adjust Tax Return After Selling CART RSUs

After selling CART RSUs, ensure your taxes are correctly filed. Oftentimes brokerages like Fidelity or Etrade will not properly reflect the fact that you paid taxes on the vest date.

This can cause you to pay taxes twice on your RSUs so you’ll want to make sure you’re being careful come tax time.

It’s too long of a subject to discuss fully here, so please read the linked article to learn more.

#5 - Make a Plan to Sell or Not Sell CART RSUs

Selling company shares is always met with some doubt, but it can be a vitally important decision if it means being able to achieve financial goals you have.

It’s very much a personal decision, and is affected by everyone’s own unique circumstances. Here are some questions to guide your thinking a little bit:

- Do you have debts to pay off?

- Are you saving for something specific?

- How much CART equity do you have?

- Does CART make up a large part of your net worth?

- How would you feel if CART’s stock price changed significantly?

If you’re sitting on more CART shares than you really know what to do with, we’re happy to help you determine what we feel is best.

#6 Follow a Selling Strategy

Selling your CART RSUs will feel weird, but if you come to the conclusion that it’s the right thing to do, there are a few different methods for selling you can consider.

Sell Everything at Vest

This is the most straightforward strategy. Selling all RSUs at vesting ensures you have enough money set aside for taxes, you’ll extract value from the company, and have funds to reinvest elsewhere or use for personal goals.

While it’s tempting to hold onto your shares hoping for a price increase, selling at vest reduces risk and provides immediate liquidity.

Now technically you might not be able to sell immediately after vest because you can only trade during open trading windows, so this strategy is either sell immediately at vest or as soon as you’re able to.

Sell 80% at Vest

This approach strikes a balance between diversification and retaining some stake in CART’s future growth. By selling the majority of your RSUs at vest, you significantly reduce your risk while still holding onto a portion of your shares.

This can be a psychologically comforting strategy, allowing you to feel you’re still participating in the company’s success while getting most of your dollars out for other things.

Sell Half at Vest

Selling half of your RSUs at vest ensures you have enough for taxes and provides cash for other uses, such as paying off debt or investing in other opportunities. This strategy leaves you exposed to the performance of CART’s stock, which could be beneficial if CART performs well, but it could also work out poorly if you’re relying too much on CART’s performance in the future.

It’s important to stress test your financial situation to understand how a significant drop in stock price could affect your goals.

Tip #7 - Avoid checking the stock price daily

Now that Instacart has IPOed, you’ll see the price of the company fluctuate throughout the day. It’s tempting to track Instacart’s stock price, but for the sake of your mental health, we’d recommend limiting how often you check it.

We recognize that the temptation to keep checking will be strong especially with all the chatter that is likely to be going on on Teams chat, Slack channels, etc. Although it can be fun and exciting, it can also be draining, so it may be wise to take a break from the noise.

Tip #8 - Don’t be afraid to consult a professional

We recognize that managing your Instacart RSUs through this IPO can be overwhelming and stressful. It’s likely you don’t just have RSUs so there’s probably a lot of things you’ll want to consider.

If you feel at all like you’re getting a little ahead of yourself on the subject, we highly recommend speaking with a professional. We’re happy to help and/or provide recommendations for financial advisors and tax advisors who can help guide you through this process.

Final Thoughts on Managing Instacart RSUs

This is a super exciting time and you should consider yourself very lucky. There aren’t many companies that go from a small start-up to IPOing for billions of dollars. This is a unique opportunity for you to make the most of your Instacart RSUs and set yourself up for future success.

If you have any questions or have additional tips you feel we should add/expound on, please let us know!