Although an IPO creates a market and an ascertainable value for your company stock, you are still "cash poor" until you actually sell and diversify. This is why the expiration of the IPO lockup creates as much excitement and anxiety as the actual IPO. There have been a number of studies demonstrating that share prices often decline leading up to and on the unlock date. As a result, many stockholders hoping to sell are reluctant to do so and wonder if they should just wait it out. As you explore what the right decision is for you, it is important to examine not only the probabilities of potential outcomes but also the potential consequences of those outcomes.

While many stocks dip during the IPO lockup expiration and later rebound, others simply continue a downward spiral. While you may truly believe in the outlook of the company and be tempted to bet heavily on it, it is important to first understand your own definition and tolerance for risk. In finance, we often define risk as volatility, but when it comes to your life the real risk is not reaching your goals. Even if the stock is trading down what does that potential value mean for you and your life? For some, it might mean paying off student loans or a down payment on a house. For others, it could be enough to provide financial security or attain financial freedom. Regardless of the number of shares you have, you need to evaluate whether you are willing to jeopardize goals that may already be within reach in hopes that the future performance of your company stock will outpace a diversified portfolio.

Another way to look at it is to consider your likelihood of regret. If you choose to sell everything right away and the stock price later jumps upward, you may regret not holding out longer for a higher price. Alternatively, if you choose not to sell anything and prices move permanently downward you will regret not selling when you had the chance. The latter is especially true when you can no longer attain the goals that were once in sight. If you can determine the number of shares that is the fulcrum balancing these two forms of regret in your mind that is a good place to start.

In the end, the reasonable strategy for many is to sell at least some of their shares early and sell the remainder over regular intervals. This allows you to take some proverbial chips off the table, while still capturing what can be thought of as temporal diversification (selling over time to capture different price points—similar to dollar cost averaging). Exactly how much to sell right away, how much to sell over time, and how much to keep indefinitely is a personal decision that will be driven by your unique goals and tolerance for risk.