Restricted stock is given by a corporation, while common stock can be bought and sold at any time. This makes the recipient of the stock liable for income-tax consequences immediately but establishes a cost basis.

Are restricted stock units worth it?

Unlike stock options, RSUs are almost always worth something even if the stock price of your company falls. For example, 1,000 RSUs at a company whose stock fell from $20/share to $10/share is still worth $10,000 versus potentially nothing with options.

What’s the difference between restricted stock and stock option?

Enter stock options. What is a stock option? Unlike restricted stock, an owner of a stock option does not have an actual ownership interest in the company at the time of issuance. A stock option is an agreement between the company and the employee that grants them the option to purchase company stock for an agreed-upon price.

Can a restricted share be sold after an IPO?

Restricted Stock for Employees. The shares can be restricted by a market standoff provision, which restricts the sale of shares for a certain period of time after an initial public offering (IPO) to stabilize the market price of the stock.

When does restricted stock become unrestricted for an employee?

Restricted Stock for Employees. The shares can be restricted by a double-trigger provision, meaning that an employee’s shares become unrestricted if the company is acquired by another and that the employee is fired in the restructuring.

What’s the difference between restricted shares and vested shares?

Restricted Shares. Restricted shares are, as noted, an outright award of equity ownership in a company. They are most common in established companies that want to motivate employees by giving them an equity stake. However, they are usually vested.