Ask HN: Do stock price changes affect the value of your annual stock grant? | Hacker News Reader

Ask HN: Do stock price changes affect the value of your annual stock grant?

3 pointsjjmarr2 comments

Assume I get a US$4k grant with 1/4th vesting every year, there are two options:

1. I get RSUs worth US$1k in the first year, then the stock triples in price. I would then get US$3k worth of stock in the second year. I essentially get more money when my stock units vest.

2. I will always get the same dollar value of RSUs every year. This would mean I would get US$1k in stock every year, no matter how the stock performs.

Is 1. or 2. the "normal" method of granting stock? I just had two arguments with a friend and my dad, each completely convinced that 1 or 2 is the standard way stock grants work.

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There's two factors to consider. There is the initial grant, and equity refreshers.

Normally, you'll get an initial grant when you join. The size of this grant will be decided based on its dollar value at the time of issue (ie scenario 1).

The grant will then vest on a schedule over the next 3-4 years, and the proceeds you earn depend on the price at which you sell your stock when it vests.

If you perform well and the company wants to keep you around, they may issue a refresher every year. This is where they issue you with additional RSUs on top of what you have, and this stock has its own vesting schedule; sometimes part of it will vest immediately, so in that case it will be like scenario 2.

The size of your refresher will also be determined by its value at the time of issue.

RSU grants are typically only in "dollars" at the very beginning, and the amount of shares is decided based on the date the grant begins. This is how people make tons of money if their company's stock explodes. I've had the good fortune of a 200k (divided over 4 years) stock grant turning into 450k, but this is nothing compared to what many people experienced in the last decade.

Of course this can work against you to. Some peoples RSU vest lower than the price when the grant was issued.

Another (usually small but no always) factor to consider is that sometimes it can take a month or two for the price of shares to get locked in. It's typically not on your start date, but at some future date after you start when the company issues all the grants.

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