Restricted Stock: Basics

Why You'll Learn To Like Restricted Stock Grants

Richard Friedman
Your company is no longer granting you stock options, or at least fewer than before. Instead, you're receiving restricted stock or restricted stock units. While these grants don't carry the same upside as stock options, they have benefits you will surely appreciate once you understand the special features of these grants.

Restricted Stock Fundamentals: What You Need To Know (Part 1)

Bruce Brumberg and Kate Victory
Your company has awarded you restricted stock. Restricted stock grants carry their own requirements, which you need to understand before you can profit from them. In Part 1 we discuss the rules and restrictions of vesting and sale.

Restricted Stock & RSUs: The Next New Thing In Stock Grants?

Bruce Brumberg
myStockOptions.com
PowerPoint presentation (in PDF) that Bruce Brumberg, editor-in-chief of myStockOptions.com, developed for talks and meetings on restricted stock and RSUs. (Premium members can view it and may request permission to use it at their companies.)

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Does this website's content on restricted stock also apply to restricted stock units (RSUs)?

Generally, yes, with two exceptions. First, with RSUs you cannot...

What is restricted stock? Does it differ from restricted securities?

Restricted stock refers to outright grants of company stock to employees or other service providers. It is "restricted" because...

What advantages does restricted stock have over stock options?

Restricted stock always has some value to you even when the stock price drops below the price on the date of grant...

Can restricted stock and performance shares go underwater?

Not in the way stock options can. Restricted stock is worth the full market value of the stock when it vests (or, with restricted stock units, when shares are delivered). It does not matter if...

UPDATED! Which do companies grant more often: restricted stock or restricted stock units (RSUs)?

Starting with the broad grants of RSUs at Microsoft and Amazon, recent corporate practices suggest it is more likely that your company will grant you...

What is the process of granting equity awards?

Stock grants, such as options or restricted stock, are typically determined by the group or person that sets cash compensation levels and bonuses at your company. The full board, compensation committee, or authorized officer of the company then...

Are stock option and restricted stock grants negotiable? What terms are negotiable at hire?

In most instances, stock grants are subject to the same types of practical limitations as negotiations for your cash compensation. For example, an employer may...

What guidelines do employers use to determine how many stock options or restricted shares to grant?

Though this varies from industry to industry and among peer companies, most companies use a combination of...

My company granted me stock options and restricted stock under its 2000 plan. Why wasn't my grant under a plan of the current year?

Some companies have more than one stock plan. When a company offers just one omnibus plan...

What does a stock grant agreement look like, and what terms does it cover? Where can I find samples?

Depending on the type of equity award, a stock grant agreement can have one or several pages setting forth a range of terms for you to review, including...

Does a grant of restricted stock or performance shares have an expiration date, as stock options do?

Not for standard time-vested restricted stock. These grants do not have a term, as stock options do. The vesting of restricted stock depends on...

Do I need to buy the restricted stock from my company or exercise something to get it?

In a public company the shares are usually granted at no cost to you...

How do I calculate the value of my restricted stock?

The calculation is simple. You multiply the number of shares you received by the...

How does a stock split affect my restricted stock grant?

Your grant is adjusted according to the split ratio that applies...

Do I receive dividends on unvested restricted stock and have voting rights?

Although normally you cannot transfer them until vesting, shares of restricted stock are issued to you and are outstanding in your name from the time of grant. Most stock plans...

Can I reinvest my restricted stock dividends in more company stock instead of taking cash income now?

Instead of paying cash dividends, a small number of companies require...

Do I get to hold the stock itself with a restricted stock grant?

Usually the shares are legended with the restrictions, and they are often...

What is a vesting schedule?

A vesting schedule dictates when you may exercise your stock options or when the forfeiture restrictions lapse on restricted stock. A schedule is time-based if you must...

Are there different types of time-based vesting schedules? Which are most common?

Yes. Vesting schedules provide for either "cliff" vesting or "graded" vesting...

What is a typical vesting schedule?

Graded vesting is more common than cliff vesting...

What service counts toward vesting?

Unlike in some benefit plans, service for time-vested option and restricted stock grants is rarely...

Do I forfeit my restricted stock if I leave the company before vesting?

Yes. You forfeit whatever stock has not vested...

Can I be fired when I am about to vest in company stock options or restricted stock/RSUs?

Generally, yes, assuming this termination is made for good-faith reasons, such as business downsizing. Most employees are "at will," which means...

My restricted stock will be "released" at vesting. What does that mean?

"Releasing" restricted stock is the process by which your company transfers or "frees" shares to you when...

What is a lapse election, and why do I need to make it before the restricted stock or restricted stock units vest?

The "lapse" is the end of the restriction that prevented the shares from vesting and being transferred to you. The lapse election is the method by which you choose withholding methods and what will be done with the...

Once my restricted stock vests, is it mine forever?

Yes. After it vests, it is stock that you own outright like any other stock...

How do I sell shares that I acquire through a stock option exercise, restricted stock vesting, or ESPP?

Whether you hold stock certificates, hold your shares in a brokerage account, or have an online trading account, you will need the assistance of a stockbroker...

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