Restricted Stock

Companies who utilize equity compensation for their employees find that restricted stock awards (RSAs) and restricted stock units (RSUs) are effective compensation vehicles, but are utilized in different ways.

 

RSAs are grants of underlying stock that are primarily reserved for key executives and granted at early stage companies.  RSUs are utilized in later stages of a company and are usually more broad-based in their implementation.  RSUs are book-keeping entries that are potentially less dilutive to the company depending on how the units vest.  Both RSAs and RSUs represent the full liquidation value of the Company that issues them.

What You Need to Know About RSUs

If you are being offered Restricted Stock Awards or Restricted Stock Units as part of your overall compensation package, it's important to take a close look at the potential ramifications of each vehicle and how these offers compare to other offers with different vehicles at alternative companies. In the case of RSAs, there may be favorable tax elections that can be utilized with the collaboration of your tax advisor.  

Restricted stock vehicles represent the full liquidation value of an underlying share, so when granted, the grant holder knows the actual value of the equity granted, which is very different from Stock Option vehicles.  Stock Option vehicles only participate in the upside of the Equity value from the date of grant forward, where Restricted Stock vehicles participate in the full value of the equity, not just the growth.  Additionally, unlike Stock Option vehicles, Restricted Stock vehicles do not have an expiration date associated with them, so once you vest, there isn't a need to exercise your shares before expiration.  

If you are in the recruiting process and would like to have subject matter expertise assist in analyzing your offers, helping you to negotiate more equity, or restructuring your counter-offers to be more advantageous to you, please Schedule a Meeting with our team at your convenience.