vest meaning stock
Stock-option plans generally come in graded or cliff vesting schedules. Restricted and performance stock are said to be “vested” when you own the shares free of restrictions—meaning you have the authority to sell, transfer, or make other important decisions concerning the shares. vest definition: 1. a type of underwear, often with no sleeves, that covers the upper part of the body, worn for…. You can usually only exercise vested stock options. Stock options "vest" according to a vesting schedule, and companies can set the schedules to reflect the kind of incentive they're trying to give. By the time the grant vests, the stock price has fallen to $20. Vest definition is - a sleeveless garment for the upper body usually worn over a shirt. In simple terms, the stock issued to a founder at incorporation is subject to a vesting schedule, meaning that incremental portions of the stock will vest over time as the founder’s involvement with the company continues (i.e., the founder continues to provide valuable services to the company). Each stock option may carry a different vesting schedule. Cliff vesting occurs when the employer sets a specific period in which an employee must work for the company before his options fully vest. Using the example above of the restricted stock grant, a graded approach might suggest that 25% of your shares vest in years one and two (for a total of 50%) and the remaining shares (valuing 50%) vest on your third anniversary. An alternative to cliff vesting is graded (or graduated) vesting which is governed by a vesting schedule. Vesting Schedules Many companies offer stock as part of an employee compensation plan. For example, a company could give you options on 6,000 shares that vest all at once in five years, which would be designed to keep you around for the long haul. In a graded plan, employees are allowed to exercise only a portion of their options at a time. Become applicable or exercisable. But usually, this stock has to ‘vest’ first, meaning that employees must work for the company for some time to get their hands on the stock. Example: Your company grants you 2,000 RSUs when the market price of its stock is $22. The grant is then worth $40,000 to you before taxes. How to use vest in a sentence. Unlike stock options, RSUs always have some value to you, even when the stock price drops below the price on the grant date. In a cliff plan, the employee gets access to all of the stock options on the same date. If he continues to work for the company until the vesting date, he can exercise his options contract and purchase company stock … Vest. Learn more. 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