The Advisors' Blog

Pay Governance’s latest viewpoint discusses considerations for pre-IPO companies considering the size of their initial equity plan share pools. In addition to sharing their own thoughts and tips, they base their recommendations on a review of 80 equity plans adopted by companies that went public in early 2026 and compared what they found with their 2022 findings. Here are their high-level takeaways:

– Share pool reserve: The median at-IPO reserve is 8.9% of fully diluted shares outstanding (“FDSO”), slightly above the 2022 median of 8.7%

– Overhang at IPO: Median overhang is 15.1% of FDSO, a modest increase from our 2022 study (14.4%)

– Evergreen provisions: Automatic annual refresh provisions (i.e., evergreens) remain highly prevalent at IPO, appearing in 80% of plans reviewed, representing a slight increase from our 2022 study. The most common evergreen amount was 5% of common shares outstanding (“CSO”)

– Industry differentiation: Life sciences and technology companies continue to be heavier equity users than other industries

Beyond these median data points, the viewpoint stresses that companies should consider their equity strategy and allocation levels and how those compare to peers in their industry, since that may be indicative of shareholder expectations.

– Meredith Ervine