Employees often receive Restricted Stock Units (RSUs) as a form of compensation from their employer. RSUs are similar to stock options in that they represent an ownership stake in the company and can be worth a lot of money down the road.
However, unlike stock options, RSUs are not immediately available to the employee; instead, they “vest” over time, which means the employee must stay with the company for a certain amount of time before the units vest and become available.
If you’ve been granted RSUs that have vested but not yet been released, it means you have fulfilled your vesting requirements and are entitled to the units, but the actual units have not yet been transferred to you. The release date is usually set by the employer and is usually tied to a specific event, such as the completion of a project or hitting certain financial targets.
Once the release date arrives, the RSUs will be transferred to you and will be immediately available for sale. The proceeds from the sale will be deposited into your brokerage account, just like any other stock sale.
If you’re thinking about selling your RSUs as soon as they’re released, you may want to consider holding onto them for a while instead. Unlike stock options, which expire after a certain period of time, RSUs do not expire; you can hold onto them for as long as you want.
Additionally, since RSUs are typically granted at a price of $0 per share, you will likely see a significant increase in value as soon as they’re released (assuming the company’s stock price has gone up since the units were granted). This makes RSUs an excellent long-term investment; by holding onto them for a year or two (or longer), you stand to make a lot more money than if you sold them immediately.
What is Vesting?
In simple terms, vesting is when you have the right to own something. When you vest in your RSU, it means that you have the right to purchase the stock that has been set aside for you. The number of shares that you vest in will depend on the vesting schedule set forth by your company.
How Does Vesting Work?
Typically, RSUs will vest over a four-year period. This means that you will have the right to purchase 25% of the shares after the first year, 50% after the second year, 75% after the third year, and 100% after the fourth year. However, there are other vesting schedules that companies may use. For example, some companies may have a two-year vesting schedule or a six-year vesting schedule.
If you have RSUs that have vested but not yet been released, it means you are entitled to the units but they have not yet been transferred to you. The release date is typically set by the employer and is tied to a specific event, such as hitting certain financial targets. Once the release date arrives, the RSUs will be transferred to you and will be immediately available for sale. You may want to consider holding onto them for a while instead of selling them immediately; RSUs are an excellent long-term investment.