Public Company Insider x Concentrated Stock

A senior operator who has been paid in equity for a decade arrives at a quiet kind of problem. The grants vested, the options were exercised, the stock mostly moved up and to the right, and somewhere along the way the majority of a life's net worth came to rest in a single ticker: the employer. The position is the proof of a bet that worked. Measured honestly, it is also the largest unmanaged risk the person carries. The pattern recurs across the operators I study, at companies worth a few hundred million to a few billion, and the shape is always the same. The wealth is real. The ability to act on it is slower, narrower, and more gated than the account statement implies. This is a field note on that gap, and on why it stays open longer than it should.

The Base Rate

The instinct that protects a concentrated position is the belief that this company is different. The long-run data is unkind to that belief. Studying tens of thousands of stocks across global markets, the majority of individual U.S. companies (55.2%) underperformed one-month Treasury bills over their lifetimes, with nearly all net wealth creation traceable to a small fraction of names (Bessembinder, Chen, Choi & Wei, Financial Analysts Journal, 2023). J.P. Morgan's long-running study of concentrated positions defines a catastrophic loss as a stock that falls 70% from its peak and never recovers, and finds that the companies which suffer them are not the obviously weak ones. In its 2024 analysis, 54% of catastrophic decliners were profitable at their peak, most carried only modest debt, and consensus analyst ratings on them were tilted toward "strong buy" at the top (J.P. Morgan, The Agony & The Ecstasy, October 2024). The list of names that have done it in recent years is not a list anyone saw coming: PayPal, Moderna, Zoom, Block, Estée Lauder, Silicon Valley Bank (J.P. Morgan, The Agony & The Ecstasy, October 2024). "Looks healthy" has never been the same thing as "is safe."

The Concentration

The exposure is usually larger than the holder admits. Charles Schwab's equity-compensation research found company equity makes up, on average, more than a quarter (27%) of an equity-comp holder's net worth, and 41% for the youngest cohort, well past the 10% to 20% ceiling Schwab itself recommends for any single position (Charles Schwab Stock Plan Services, Equity Compensation Survey, 2019). The structural reason the number keeps climbing is that the pay itself is now equity by default. Among technology companies, 99% grant time-based restricted stock and only 51% still grant options, so concentration accrues automatically, vest after vest, whether or not anyone decides to let it (Compensia, Technology Sector Equity Usage Practices). The position is not a choice made once. It is the residue of how the work was paid.

The Freeze

Knowing the risk and acting on it are different things, and the distance between them is where the damage lives. Schwab's participants name the reasons plainly: they are waiting for more favorable market conditions (38%), they are worried about taxes (30%), and a meaningful share simply are not sure how to sell (18%) (Charles Schwab, Equity Compensation Survey infographic). Fewer than half of equity-plan participants have ever sold or exercised a single share (Charles Schwab Stock Plan Services, Equity Compensation Survey, 2019). The tax concern is rational. A position built from early grants often carries a basis near zero, so a sale realizes almost pure gain, taxed at a top federal rate of 23.8% once the 20% long-term rate and the 3.8% net investment income surtax are combined, before any state takes its share (Fidelity, Capital Gains Tax Rates, 2025). Doing nothing feels free. It is not. It is a standing decision to remain maximally exposed to the base rate, reframed as patience.

The Machinery

For the insiders in this group, even the decision to act runs into a system that will not move quickly. Officers and directors live inside blackout windows around earnings and the constant constraint of material nonpublic information, which can lock them out even when a window is technically open. The clean route is a Rule 10b5-1 plan, a selling schedule adopted while the person holds no inside information so it can execute on its own terms later. Since the SEC's amendments took effect in February 2023, a director or officer who adopts one must wait out a cooling-off period before the first share sells: the later of 90 days, or two business days after the next quarter's results are disclosed, capped at 120 days (U.S. Securities and Exchange Commission, Rule 10b5-1 Fact Sheet, December 2022). Overlapping plans are largely prohibited, single-trade plans are limited to one per twelve months, and the adopter must certify good faith (U.S. Securities and Exchange Commission, Rule 10b5-1 Fact Sheet, December 2022). These plans are now the default channel rather than the exception: 97% of public companies report insider use of them, up from 74% in 2021 (Morgan Stanley at Work, 2025 10b5-1 Plan Trends Report).

The rules also have teeth. In June 2025, a former public-company chairman was sentenced to 42 months in prison, a 5.25 million dollar fine, and more than 12.7 million dollars in forfeiture, in the first federal insider-trading prosecution built entirely on the abuse of 10b5-1 plans. He had begun selling the next trading day, skipping any cooling-off period, and the stock fell more than 44% days later (U.S. Department of Justice, June 2025). And every sale that does happen is public almost immediately. Insiders report changes in their holdings on a Form 4 within two business days, and affiliates selling restricted stock file a Form 144, where the board, employees, and the market can read the move as a verdict (U.S. Securities and Exchange Commission, Insider Transactions and Forms 3, 4, and 5). For an affiliate, Rule 144 itself caps sales in any three-month period at the greater of 1% of shares outstanding or the average weekly trading volume (U.S. Securities and Exchange Commission / Deloitte, Rule 144 Compliance Guide). Diversification, for this person, is not a trade. It is a program that has to be built before it is needed.

The Lockup

The sharpest version of the problem arrives with a recent IPO. The lockup lifts, the paper number becomes one that can finally be acted on, and that same moment is when supply reaches the market and the price often sits under the most pressure. The standard study of lockup expirations documented a permanent 40% increase in trading volume and a statistically significant negative abnormal return as the restriction lifts, concentrated in venture-backed companies (Field & Hanka, The Journal of Finance, 2001). The effect persists even though the expiration date is known in advance to everyone, which is why companies have increasingly tied early releases to share-price thresholds set well above the IPO price (Cooley, Early Lock-Up Releases, January 2025). The first day an operator is allowed to sell is rarely the calmest day to decide how.

The Toolkit

None of this is unsolvable. The strategies exist and are well understood. Tax-loss harvesting on the diversified side of a portfolio can offset gains realized on the concentrated side, with research putting the long-run tax benefit near 1% a year, though it cannot by itself defer the embedded gain on the concentrated position (Chaudhuri, Burnham & Lo, Financial Analysts Journal, 2020). Direct indexing, the vehicle that makes that harvesting systematic, has moved from niche to mainstream, reaching 864.3 billion dollars in assets by the end of 2024, nearly double its 2021 level (Cerulli Associates, Direct Indexing Assets, 2025). For the concentrated block itself, an exchange fund can defer the gain by contributing the stock into a diversified partnership under Section 721, at the cost of a seven-year holding period and a structure that carries the original basis forward rather than erasing it (Kitces, Exchange Funds and Section 721, 2024). What complicates all of it is that the insider's toolkit is narrower than a normal investor's: most company policies bar hedging and pledging of company stock, and federal law prohibits insiders from short-selling their own shares, removing several of the instruments built for exactly this purpose (Dorsey & Whitney, Section 16 Reporting Requirements, 2025). The solution is rarely one move. It is a sequence, staged across tax years and trading windows, designed in advance.

The Gap

The assumption is that anyone holding a position this size is already well advised. Frequently they are not, and the reason is structural. The strategies above demand specialized fluency, and that fluency is scarce. Even as direct indexing crossed 864 billion dollars, only about 18% of financial advisors use it, and surveys find a minority are even familiar with how it works (Cerulli Associates, Direct Indexing Assets, 2025). Serving equity-compensation clients well "requires significantly more specialized knowledge and skills" than general planning, which is precisely why few advisors do it (Kitces, Serving the Equity Compensation Planning Niche). The established wealth desks are built around money that is already liquid and already diversified, the after-the-exit money. The operator still climbing, with a serious but not yet dynastic position that is locked, restricted, concentrated, and taxed on contact, sits in a gap: wealthy enough to carry a real problem, not yet attached to anyone who solves it. The window in which that is true does not stay open forever.

The Routing

If the read here is closer to the situation than the current plan is, the next step is a short email to javien@byyourpresence.com. Useful to include: the rough size of the position relative to total net worth, whether a 10b5-1 plan is already in place, whether a lockup or blackout window is near, and where the decision has stalled. The response is a routing read, not a pitch. Who to talk to first. What to sequence next. What to leave alone. If the framing is not the situation, that gets said plainly too. That is a real answer.