QSBS Spotlight: Nerdio’s $500M Series C and Secondary Sales

A weekly series where we cover recent acquisitions, capital raises, and pending IPOs that may be Qualified Small Business Stock (QSBS) tax exemption eligible, granting investors and planners insight into real world planning opportunities using QSBS rollovers.

Nerdio’s $500M Series C unlocks “unicorn” status for the company, and possibly significant liquidity options for the founders. It’s quite common for founders to take some money off the table at Series B/C especially after being in the business for as long as Nerdio’s founders have (about 9 years).

When this happens, regardless of company size, founders who have been in the business have two options if their stock is QSBS eligible.

First, they can opt to use some (or all) of their $10M per-issuer QSBS exclusion amount on the secondary sale gains. This would decrease the amount of tax free gains they can claim in the future by the amount they exclude, but it would make the sale tax free (in most states).

Or, they could utilize a QSBS rollover by claiming a gain deferral under Section 1045 and re-invest the proceeds into a new opportunity. This would retain the $10M QSBS exclusion cap on their 1202 exemption, and create a new $10M cap in the rollover investment.

It’s worth exploring a QSBS rollover in these situations if the shareholder/founder has no immediate liquidity needs and wants to maximize their long term tax exclusion eligibility under QSBS.

NOTE: The other instance where a founder may want to do a QSBS rollover after a secondary sale is when their stock has been held for less than 5 years. (Rollovers are actually the only option for shareholders finding themselves in this situation if they want to avoid tax.)

For more information on QSBS rollovers and how they can help to extend the QSBS holding period or multiply the $10M exclusion limit, read more below. You can also contact our team Program Director at brady@QSBSrollover.com, or take our eligibility quiz, here.

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You could benefit from a QSBS rollover if:

• You recently sold QSBS before the 5 year minimum hold period

• You recently sold QSBS that you held for 5 years, but your gain exceeds $10M

• You’re considering an exit in the next 1-4 years and want to think ahead about tax planning

• Are an angel investor seeking flexible QSBS opportunities to help defer gains

The Vint Retail Partnership Program can be a solution for QSBS gain holders in need of a flexible, low-risk, and relatively liquid QSBS opportunity. Get in touch with our team today to learn how to partner with us and potentially save millions in gains tax from a stock sale.

Here are some of the questions we typically ask when having a first meeting with potential partners:

• Did you recently sell or are you holding Qualified Small Business Stock?

• When did you sell your stock?

• Was this your first liquidity event?

• Are you a founder, early employee, outside investor/angel, etc?

• Are you certain that your stock met the Active Trade/Business and other requirements under Section 1202? (Outside of holding period requirements)

• What is your intended rollover amount?

• How long did you hold your initial stock?

(Read more about QSBS planning and see some example situations)