QSBS Spotlight: The $2B+ QSBS Goldmine Beneath Wiz
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.
Alphabet (Google), has announced its largest cybersecurity acquisition ever, agreeing to buy Wiz for $32 billion in an all-cash deal. While this represents a staggering outcome for Wiz’s founders, early employees, and investors, it also comes with an equally staggering tax consequence.
Because Wiz was acquired so close to the 5 year QSBS holding benchmark (just after), many of its early shareholders may still be facing tens of millions in unnecessary capital gains taxes. For those who invested early, the potential for 100% tax-free gains is still possible, even if they haven’t held shares of stock for a full 5 years or made more than $10M. Consider that co-founders Assaf Rappaport, Ami Luttwak, Yinon Costica and Roy Reznik may each be looking at tax bills well in excess of $500M - with reports from last year that each owns around 9% of the company.
Fortunately, there’s still a powerful tool available: QSBS Rollovers. By reinvesting gains into new QSBS-eligible stock within 60 days of the acquisition, Wiz shareholders may still be able to eliminate or defer their tax liability if their stock met the other QSBS requirements outside of holding period.
For gains in excess of $10M, rollovers can be used as a multiplication tool for the $10M cap, much like trusts can be used to expand the exclusion.
With this in mind, it’s very possible, maybe even likely, that the potential tax savings via QSBS and QSBS rollovers on this deal is far beyond $2B.
For any pre-five-year exit, a QSBS rollover is the only option available to shield gains from taxes. Structured correctly, these rollovers can secure liquidity, reduce risk, and optimize long-term wealth preservation.
Congrats to the entire Wiz team on an incredible outcome - especially after turning down a $23B acquisition bid last year. The risk, and patience, paid off.
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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)
