A pen notebook and calculator laying on top of sheets of paper
Private Companies

Nasdaq Private Market: An Overview Of Restricted Stock Units

What might a private company consider when offering restricted stock units (RSUs) as an equity incentive for employees? Nasdaq Private Market (NPM) explores this topic in their new paper, "An Overview of Restricted Stock Units."

What might a private company consider when offering restricted stock units (RSUs) as an equity incentive for employees? Nasdaq Private Market (NPM) explores this topic in their new paper, "An Overview of Restricted Stock Units."

As private companies continue to evolve and rapidly grow in size, retaining and attracting top talent has become increasingly challenging. 1 There are many ways to structure an employee equity program, but the vast majority of private companies choose stock options or restricted stock units. Nasdaq Private Market has facilitated more than 200 secondary programs since 2013, working with companies that allow employees to sell vested shares or exercise and sell options. As companies continue to explore RSUs as an equity incentive option for their employees, the NPM team is sharing their knowledge and experience.

  • An Introduction to RSUs:

Restricted stock units are an offer by the company to provide a specific number of company shares (or the cash equivalent of those shares at the time of vesting) at some agreed-upon timeframe in the future. RSUs resemble options in this way, in that options represent the right to buy company's stock at a specific price (referred to as "strike price" or "exercise price") at some point in the future ("exercise date"). Similar to how option holders become official company shareholders when they exercise their options, RSU holders become official company shareholders when the RSUs vest.

  • Benefits and costs of using RSUs compared to options:

The decision to use RSUs or options is very specific to each company's lifecycle, liquidity needs, and employee retention and recruitment plan. While RSUs typically do not need to establish 409a which therefore saves money on valuation, options, for example, do not have taxes as they vest.

  • Key considerations before including RSUs in liquidity programs:

With the demand for liquidity on the rise, talent acquisition teams at private companies are feeling the pressure to compete with more established businesses in their industry. Taking into consideration key factors, such as vesting and liquidity conditions, will help inform whether RSUs are the right asset class structure for a private company or not. Nasdaq Private Market has found that by working closely with a legal counsel to map out all implications of these incentive structures, designing a path that addresses potential problems, and considering a blended approach like a blended RSU plus option program may lead private companies to an effective equity incentive program.

Learn more by accessing the whitepaper here.


PLEASE READ THESE IMPORTANT LEGAL NOTICES AND DISCLOSURES

The information contained herein is provided for informational and educational purposes only. The NASDAQ Private Market, LLC does not provide legal, tax, investment or financial advice.

None of the information provided herein, or information displayed on or downloadable from, nor any of the applications and services available, via the Nasdaq Private Market represents an offer to buy or sell, or the solicitation of an offer to buy or sell, any security, nor does it constitute an offer to provide legal, tax or investment advice or service.

Investing in private company stocks is speculative and involves a high degree of risk. You must be prepared to withstand a total loss of your investment. You are strongly encouraged to complete your own independent due diligence before investing in private company stock, including obtaining additional information, opinions, financial projections, and legal or other investment advice.

The NASDAQ Private Market, LLC is not: (a) a registered exchange under the Securities Exchange Act of 1934; (b) a registered investment advisor under the Investment Advisors Act of 1940; or (c) a financial or tax planner, and does not offer legal, financial, investment or tax advice to any user of the Nasdaq Private Market website.

Technology services may be offered by The NASDAQ Private Market, LLC's wholly-owned subsidiary, SecondMarket Solutions, Inc. Securities-related services are offered through SMTX, LLC, a registered broker-dealer and a member FINRA/SIPC and wholly-owned subsidiary of The NASDAQ Private Market, LLC. Securities in transactions conducted through SMTX, LLC are not listed or traded on The Nasdaq Stock Market LLC, nor are the securities subject to the same listing or qualification standards applicable to securities listed or traded on The Nasdaq Stock Market LLC.

All technology and securities-related services are subject to standard terms and conditions applicable to each service. For terms and conditions applicable to use of each such service, prospective customers please contact sales@npm.com , and current customers please refer to your contract with The NASDAQ Private Market, LLC or its relevant affiliate or subsidiary relating to such service.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.