Anduril IPO: Best Strategies for Your Employee Equity
As speculation grows for an Anduril IPO, many employees are starting to wonder what it could mean for their equity. If you hold Anduril stock, the choices you make in the year ahead will decide how much of that wealth you get to keep. Here are some tax and investment strategies worth knowing.
Strategy #1: Exchange Funds
When Anduril goes public, you will finally be able to trade your company equity on the open market. While you may be tempted to sell everything at once to diversify, that can mean taking a massive tax hit. Your gains would likely be eaten away by the IRS before you could reinvest in a diversified portfolio. However, leaving all your eggs in one basket is never wise, especially when newly public stocks can be so volatile.
One solution to this problem is investing in an exchange fund. To do that, you will pool your Anduril shares alongside other investors holding concentrated positions in different companies. In return, you receive a proportional interest in a diversified basket. Because there is no sale, no tax is triggered, and your full investment can continue to grow for years to come. When you are ready to exit the fund, you will pay a deferred capital gains tax.
Exchange funds typically require you to stay invested for seven years to preserve the tax benefit, so they tend to work best as part of a longer-term diversification plan rather than a quick fix. Minimum investments can also be costly, often starting at mid-six figures or higher.
Strategy #2: Section 351 Exchanges
A Section 351 exchange works similarly to an exchange fund, but without the seven-year lockup. This rule was originally written for business owners contributing property to a corporation in exchange for stock. Recently, however, it has been adapted as a way for investors to diversify a concentrated position.
Like an exchange fund, you will pool your Anduril stock with other investors in return for a proportional interest in the diversified fund. In this case, you would form a new exchange-traded fund (ETF) to hold the shares, and unlike a standard exchange fund, there is no seven-year holding period. You can exit the fund and sell your shares at any time. Minimum investments are often lower as well.
The catch is that for a Section 351 exchange, the IRS requires that your largest holding cannot make up more than 25% of your total contribution, and your top five holdings can’t add up to more than 50%. That means a large Anduril position could not be used for this strategy. For most employees, a Section 351 exchange will work best as a supporting piece in a broader plan.
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Strategy #3: Donor-Advised Funds
If you have charitable goals, a donor-advised fund (DAF) can be a great way to diversify your stocks while supporting a good cause. Rather than selling your Anduril shares and donating the after-tax cash, you can contribute the shares directly to a DAF. The DAF will sell your shares tax-free, then reinvest the proceeds on your behalf. You can then recommend grants to a charity or charities of your choice whenever you are ready.
As a bonus, you will receive an income tax deduction based on the fair market value of your donation. This deduction applies in the year you contribute to the fund, capped at 30% of your adjusted gross income for that year. If your gift exceeds that limit, you can carry the unused portion forward for up to five years.
Because you are giving the full pre-tax value of your shares, more of your gift will actually reach the causes you choose. That means you can do more for others while also reducing your own tax bill.
Strategy #4: Charitable Remainder Trusts
A charitable remainder trust (CRT) is similar to a DAF, but with a built-in income stream for yourself or another beneficiary. To use this strategy, you will transfer your Anduril shares into an irrevocable trust, which will sell the shares tax-free and reinvest the proceeds. The trust will then pay out a steady income to you or a beneficiary you name for a set number of years or for life. Once the set term ends, any remaining money is donated to a charity or charities of your choice.
As with a DAF, you also receive an income tax deduction when you set up the trust, based on what the charity is ultimately expected to receive. That deduction is typically capped at 30% of your adjusted gross income for the year, with a five-year carryforward for any unused portion.
If you’re planning to retire soon, a CRT can be a great way to give yourself a steady income and establish a charitable legacy later. However, a trust is irrevocable once it is funded, so this is something you’d want to be sure of before taking the leap.
This option can get complicated fast, too. If you’re considering setting up a CRT, it’s worth talking to a financial advisor who can help set up a reliable plan.
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Strategy #5: Direct Indexing and Tax-Loss Harvesting
Normally, when investing in an index fund like the S&P 500, you are tied to the full fund. With direct indexing, you can buy the individual stocks that make up an index. Because you own each stock separately, you can sell the ones that have dropped in value for a loss, then reinvest in a similar stock to keep your overall exposure intact.
This is known as tax-loss harvesting, and it lets you capture losses even in a year when the broader market is up. Those losses can then be used to offset gains elsewhere in your portfolio, such as when selling your Anduril shares. If your losses exceed your gains in a given year, you can deduct up to $3,000 against ordinary income, and any remaining losses carry forward to future years.
This strategy will not eliminate the taxes owed on a large, low-basis position, but paired with the other strategies here, it can reduce your tax bill significantly over time.
Strategy #6: Securities-Backed Lending
If you need cash for a rare event like a home purchase but don’t want to sell your Anduril shares yet, securities-backed lending is worth considering. This strategy lets you borrow a line of credit with your stocks as collateral. That way, you can access cash while your shares stay invested and taxes are deferred.
The main risk is a margin call. If the value of your Anduril stock drops significantly, the lender can require you to repay part of the loan or add more collateral to bring the loan back in line with its required terms. Because of that risk, it usually makes sense to borrow conservatively and only when you have no better options.
Ready to Build a Plan for Your Anduril Equity?
All six of these strategies have one goal: helping you keep more of what you have earned. So which one is right for you? Unfortunately, there’s no one-size-fits-all solution. The right answer depends on your specific holdings, your income needs, and your timeline.
The good news is that you don’t have to figure it all out on your own. At TrueWealth Financial Partners, we can help you review your options and set up an equity strategy that works for you.
Schedule a free 15-minute call today, and we can talk through your options.
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FAQs about Anduril
When will Anduril go public?
Anduril has not set a specific date yet or filed with the SEC. Founder Palmer Luckey has said Anduril plans to go public but isn’t in a rush. Some industry analysts consider a listing sometime in 2027 plausible. However, that timeline is still speculative rather than confirmed.
What happens to my shares when Anduril goes public?
Once Anduril completes its IPO, your vested shares become tradable on the open market for the first time. If you hold RSUs with a liquidity event requirement, the IPO satisfies that condition, and your vested shares convert to freely tradable stock. There is usually a lockup period before employees and other insiders can sell their shares, typically running for 90 to 180 days after an IPO.