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Restricted Stock: Basics


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Listen to our podcast on restricted stock/RSUs, or watch our new videos on key concepts and taxes.


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VIDEO! Restricted Stock & RSUs (Part 1): Key Aspects To Know

Bruce Brumberg
Presented by the editor-in-chief of myStockOptions.com, this engaging video covers the fundamentals of restricted stock, restricted stock units (RSUs), and performance shares to help you make the most of these grants. This video covers key concepts, such as vesting schedules and understanding your grant's value.

Restricted Stock 101: Five Essentials Of Restricted Stock & RSUs This is premium content

Matt Simon
While restricted stock and RSUs are relatively straightforward, they have technical aspects you must understand to make the most of them. Learn the essential facts of restricted stock and RSUs, including basic concepts, vesting schedules, and tax treatment.

Why You'll Learn To Like Restricted Stock Grants

Richard Friedman
Podcast included! Your company may no longer be using stock options. Instead, it may be granting restricted stock, restricted stock units, or performance shares. While these grants don't carry the same upside as stock options, they have benefits you will surely appreciate once you understand their special features.

Restricted Stock Fundamentals: What You Need To Know (Part 1) This is premium content

Bruce Brumberg and Kate Victory
UPDATES! 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 Units Made Simple (Part 1): Understanding The Core Concepts

Matt Simon
Restricted stock units (RSUs) have become the most popular alternative to stock options. While RSUs share many of the same issues as restricted stock, there are differences, and it is important to understand the basics of RSUs in their own right.

Restricted Stock & RSUs

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 may request permission to use it at their companies.)

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What are the top 10 questions I should ask about my grant of restricted stock or RSUs?

You should know the answers to the following questions. Understanding the topics involved will help you make the most of your restricted stock/RSU grant and prevent costly mistakes...

Do I need to sell my shares at the vesting of restricted stock, RSUs, or performance shares?

The vesting of restricted stock, RSUs, or performance shares is separate from the sale of the shares. Whether you sell the shares at vesting depends on various factors, including...

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

Don't confuse restricted securities and restricted stock. They are very different...

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...

Why do many companies grant restricted stock and RSUs instead of stock options? This is premium content

The compensation philosophies of companies are continually changing under the influence of many factors, from accounting rules to...

What advantages do restricted stock and RSUs have over stock options? How do the two grant types compare?

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

Why do companies shift from granting stock options to granting restricted stock units, and then sometimes back again to granting at least some stock options?

Surveys indicate that many companies use a variety of grants, including both stock options and restricted stock units (RSUs) in tandem. There are many possible reasons why a company might switch from options to RSUs...

Which do companies grant more often: restricted stock or restricted stock units (RSUs)? This is premium content

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

My restricted stock will vest soon. What must I do and decide? This is premium content

You have some decisions but fewer than you would with stock options, which prompt a decision about exercise timing and, if you hold the shares, require cash for the exercise and taxes. By contrast, restricted stock and restricted stock units...

Do I receive dividends on unvested restricted stock and have voting rights? This is premium content

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 restricted stock and performance shares go underwater? This is premium content

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...

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? This is premium content

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...

UPDATES! What guidelines do employers use to determine how many stock options or restricted shares to grant? This is premium content

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 2008 plan. Why wasn't my grant under a plan of the current year? This is premium content

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? This is premium content

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? This is premium content

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? This is premium content

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

How do I calculate the value of my restricted stock? This is premium content

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

How does a stock split affect my restricted stock grant? This is premium content

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

UPDATES! Can I reinvest my restricted stock dividends in more company stock instead of taking cash income now? This is premium content

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. Vesting is determined separately for each grant. A schedule is time-based if you must...

Are there different types of time-based vesting schedules? Which are most common? This is premium content

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

UPDATES! What is a typical vesting schedule? Do you have any data on vesting schedules and their design? This is premium content

Graded vesting is more common than cliff vesting. According to surveys, the most common vesting schedule for these grants is...

What service counts toward vesting? This is premium content

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?

If you leave the company before the vesting date of restricted stock or RSUs, you typically forfeit whatever stock has not vested. Exceptions can occur, depending on...

Can my company fire me just before the vesting of my stock options or restricted stock/RSUs?

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

My stock will be "released" or "delivered" at vesting. What does that mean? This is premium content

"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? This is premium content

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? This is premium content

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

How do I sell shares that I acquired 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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