What is the purpose of an option pool?
An option pool consists of shares of stock reserved for employees of a private company. The option pool is a way of attracting talented employees to a startup company—if the employees help the company do well enough to go public, they will be compensated with stock.
Are restricted stock units the same as stock options?
Stock options are when a company gives an employee the ability to purchase stock at a predetermined price at a given time. Conversely, RSUs are grants of stock that a company gives to an employee without any purchase. Employees get these either as shares or a cash equivalent.
Do exercised options go back into the pool?
How long do I have to exercise my stock options? If you leave your company, you can only exercise before your company’s post-termination exercise (PTE) period ends. After that, you can no longer exercise your options—they’ll go back into your company’s option pool.
Do options diluted stock?
Stock dilution can also occur when holders of stock options, such as company employees, or holders of other optionable securities exercise their options. When the number of shares outstanding increases, each existing stockholder owns a smaller, or diluted, percentage of the company, making each share less valuable.
What is better restricted stock or options?
RSUs are taxed upon vesting. With stock options, employees have the ability to time taxation. Stock options are typically better for early-stage, high-growth startups. RSUs are generally more common for companies that are late-stage and/or have liquid stock.
What is the difference between ISO and NQ stock options?
Incentive stock options are reserved for employees, offering them an opportunity to buy stock at a discounted price. What’s more, ISOs are subject to the capital gains tax rate. Non-qualified stock options may go to employees, company partners, vendors, or others that aren’t on the company payroll.