Start-ups like Uber and Robinhood have long argued that an IPO isn't 'probable' until it actually happens, allowing them to defer billions in stock-based compensation expenses. This practice centers on double-trigger restricted stock units (RSUs), which only vest after a liquidity event and a service period. Because the IPO isn't deemed probable earlier, these costs don't hit the income statement until the quarter of the offering, creating massive catch-up charges.

New research by Yale Law School professor Sven Riethmueller finds these routine expense spikes correlate with stock price declines. He argues companies exploit accounting rules to show artificially strong financials pre-IPO and that disclosures may violate securities law. The issue looms large as Anthropic and Open AI prepare for potential mega-IPOs.

Historically, stock options were standard, but double-trigger RSUs have surged over the past decade. They protect employees from tax bills on illiquid private shares but keep reported expenses low. The 'probable' threshold is set by companies and their auditors. For example, Robinhood filed its S-1 on July 1, 2021, and went public July 29, yet treated the IPO as improbable until the last moment.