Scale AI filed its S-1. The IPO window is opening.

What's publicly known

What Scale AI employees are deciding now

1. Should I exercise my ISOs before the public S-1 goes live? Once a company files its public S-1 and enters the roadshow, material nonpublic information concerns intensify. Many employees find the pre-S-1 window is the last practical moment to exercise options without navigating MNPI restrictions. The AMT exposure on a large ISO exercise at the current $29B implied FMV is significant — but the long-term capital gains clock starts at exercise, and qualifying dispositions (2 years from grant, 1 year from exercise) determine whether your eventual sale is taxed at 20% + NIIT or 37% federal.
2. What does my RSU settlement look like at an IPO? If your RSUs use double-trigger vesting — which is standard for pre-IPO companies — the IPO is the second trigger. Every vested RSU not yet settled will settle at the IPO-day fair market value, creating ordinary income in that tax year. Withholding at the IRS supplemental rate (22% federal) almost certainly won't cover the bill for employees in the 35–37% bracket.
3. Am I eligible for QSBS exclusion on my early grants? Employees who received ISOs or stock grants before Scale AI crossed $75 million in gross assets — roughly 2016 through the first part of 2019 — may hold Section 1202 qualified small business stock. The holding-period and other requirements must be met, but the exclusion can be substantial. This is the highest-leverage planning question for early employees and is time-sensitive.
4. What was the reported tender offer, and can I access secondary markets? Scale AI conducted a reported tender offer at a $25 billion valuation ahead of the S-1 filing, providing some employee liquidity. Whether another window opens before the IPO is unknown. For employees outside a tender, Forge Global and similar secondary platforms list Scale AI shares, but transfer restrictions in grant documents likely prohibit sales without company consent.

Equity instrument planning: ISO, NQSO, and RSU

Incentive stock options (ISOs)

ISOs granted at low strike prices early in Scale AI's history represent the largest potential gain — and the highest planning leverage. At a $29 billion valuation, options from a 2017 or 2018 grant at a cents-per-share strike imply enormous spreads.

• Exercise cost vs. AMT exposure: Exercising ISOs doesn't create ordinary income — but the spread (FMV at exercise minus strike price) is an AMT preference item added to your alternative minimum taxable income. AMTI above the 2026 AMT exemption ($90,100 single / $140,200 MFJ, per OBBBA) is taxed at 26% on the first $232,600 and 28% above.⁵ On a large spread, the AMT bill can be six figures even before you've sold a share.
• Qualifying vs. disqualifying disposition: To get long-term capital gains rates on ISO shares, you must hold more than two years from the grant date AND more than one year from the exercise date. If you exercise now and sell at the IPO lockup expiration (typically 90–180 days later), you'll likely have a disqualifying disposition — the gain is ordinary income, not LTCG.
• The 83(b) timing problem: Early exercise (exercising unvested options) lets you start the LTCG clock early and can freeze the AMT preference item at today's strike-price spread instead of the higher future-FMV spread. But at a $29B implied FMV, early exercise at anything other than a very low strike means a large cash outlay and AMT exposure today. Model both paths with the ISO/AMT calculator before deciding.

Non-qualified stock options (NQSOs)

NQSO holders face a simpler — but often more expensive — tax at exercise. The spread (FMV at exercise minus strike) is ordinary income in the year of exercise, included in your W-2, subject to FICA, and withheld at the supplemental rate (22% federal for most employees, though the effective rate is higher). For a San Francisco-based employee in California's top income bracket, the combined rate approaches 52–53%.⁵

Planning levers: exercise before the public S-1 while FMV is still determined by private-market valuations (not a trading price); exercise enough to start the LTCG clock while managing the ordinary-income event; or wait for the IPO and accept the full ordinary-income treatment in exchange for certainty on price.

Double-trigger RSUs

Pre-IPO RSUs typically use a double-trigger: shares don't settle until both (a) your time-based vesting schedule is met, and (b) a qualifying liquidity event (such as an IPO) occurs. This means that if you've been at Scale AI for several years and have significant unvested equity, an IPO creates a single large settlement event — taxed as ordinary income at the IPO-day price.

The withholding gap is the central planning issue. The IRS requires supplemental withholding at 22% federal (37% above $1 million of supplemental income). For most Scale AI employees, the effective marginal rate is 35–37% federal plus 13.3% California — the gap between 22% withheld and your actual rate must be funded through estimated quarterly payments.

Federal rate shown as simplified 37% flat for illustration. Actual rate depends on total 2026 income including salary, bonus, and other sources. 2026 brackets per IRS Rev. Proc. 2025-32.⁵ California does not offer preferential LTCG rates — all gains taxed as ordinary income. Use the RSU settlement tax estimator for your specific scenario.

QSBS: the exclusion for early employees

Section 1202 of the Internal Revenue Code⁶ allows holders of qualified small business stock (QSBS) to exclude up to $10 million in capital gains on qualifying stock acquired before July 4, 2025, or up to $15 million on stock acquired after that date (OBBBA tiered regime), if the five-part eligibility test is met:

1. Stock must be in a domestic C corporation (Scale AI's corporate structure must qualify — confirm with a CPA).
2. Gross assets of the issuing corporation must not have exceeded $75 million at time of stock issuance.
3. Stock must have been acquired at original issuance (not secondarily purchased).
4. You must hold the stock for more than 5 years (3 or 4 years for tiered exclusions under the new OBBBA regime).
5. The company must be an active qualified trade or business — which excludes certain service businesses but generally includes technology companies like Scale AI.

Scale AI's gross-asset timeline

Scale AI raised its Series A (approximately $4.5 million) in 2016 and its Series B ($20 million) in 2019. Its gross assets at those points were likely well under $75 million. The Series C ($155 million) in 2020 would have pushed gross assets significantly higher, likely crossing the $75 million threshold during or shortly after that round.

This suggests employees who received stock grants in roughly 2016 through 2019 may hold QSBS-eligible shares — provided they received shares at original issuance, the company's C-corp status qualifies, and they've held for the required period. For a 2019 grant, the five-year mark passed in 2024 — those employees are already eligible to sell with QSBS treatment if the other conditions hold.

Critical caveat: Meta's 49% stake. The Section 1202 rules include complex provisions around corporate structure changes and large investor relationships. Whether Meta's 49% non-voting stake affects QSBS eligibility — particularly during your holding period — requires review by a CPA who has read Scale AI's corporate documents and your grant agreement. Do not assume QSBS eligibility without professional verification.

California does not conform to Section 1202. California taxes QSBS gains as ordinary income at up to 13.3% regardless of federal exclusion. A $5 million federal exclusion saves roughly $1 million in federal tax but produces a $665,000 California bill on the same gain.⁶

The leadership transition and what it means for your equity

Alexandr Wang's departure to Meta in June 2025 is an unusual event: a founder leaving to join a major investor while the company prepares to go public. For employees, the practical questions are:

• Is Jason Droege authorized to lead through the IPO? As Interim CEO, Droege is responsible for the IPO execution. The public S-1 will disclose the executive team and any compensation arrangements, including whether Wang receives any founder-departure equity treatment.
• Does the Meta relationship change Scale's customer concentration? If Meta becomes a dominant revenue customer post-deal, Scale's future may be more tied to Meta's AI strategy than to the broader frontier-AI market. This affects stock price risk post-IPO, not your pre-IPO equity planning decisions.
• Does leadership change affect your vesting? Typically no — your vesting schedule is contractual and survives management changes. Acceleration clauses (single-trigger or double-trigger) depend on your specific grant agreement, not on who is CEO. Review your grant documents for any change-of-control provisions.

Six planning steps for Scale AI employees now

1. Locate every grant document. Grant date, type (ISO/NQSO/RSU), strike price, vesting schedule, double-trigger terms, and expiration date. These are the inputs to every tax calculation.
2. Run the ISO/AMT scenario. At the current implied FMV (~$29B valuation), the spread on most outstanding ISOs is large. Use the ISO exercise + AMT calculator to estimate the cash needed for exercise plus the AMT bill, and compare that against the expected tax savings from qualifying-disposition LTCG treatment at the IPO.
3. Check QSBS eligibility if you received grants in 2016–2019. The $75 million gross-asset test is the gatekeeping question — it requires the company's capitalization history, not just public knowledge. Ask a CPA who can review Scale's cap table history and your grant documents. This is the single highest-leverage question for early employees.
4. Model the double-trigger RSU settlement. If your RSUs haven't settled yet, estimate the ordinary income at IPO pricing using the RSU settlement tax estimator. The gap between 22% supplemental withholding and your actual rate must be funded; Q3 estimated taxes may be due September 15, 2026 if the IPO occurs in Q3.
5. Set a concentration target before the lockup opens. Most IPOs include a 90–180 day lockup — often staggered by holder type. Decide your target concentration (what percentage of your net worth you'll hold in Scale AI stock six months post-IPO) before price volatility makes the decision emotional. The concentration glidepath calculator models a multi-year sell-down.
6. If you're a Scale AI officer: understand 10b5-1 rules now. Officers face a cooling-off period of the later of 90 days or the next 10-Q plus two business days (max 120 days) before a 10b5-1 plan allows trading. If you're planning to sell at the first lockup window and are subject to MNPI restrictions, you may need to adopt a plan well before the IPO. See the 10b5-1 trading plans guide.

The window before the roadshow is short.

Get matched with a fee-only fiduciary who specializes in pre-IPO equity planning — ISO exercise and AMT modeling, double-trigger RSU settlement taxes, QSBS eligibility, and concentration planning for a concentrated post-IPO position. Free, no obligation. If you're a Scale AI employee with a specific event coming up, say so and we'll prioritize the intro.