Private Shares
Startup companies have turned to granting restricted stock to employees instead of options before initial public offerings because it removes the difficulty of trying to value its private shares, said Barbara Baksa, executive director at the National Association of Stock Plan Professionals. While options require an exercise price over which an executive must create value, restricted shares may vest and be sold at any price.
Initial public offerings are “a challenging time because you sometimes see a lot of stock price fluctuation right after a company goes public,” she said in a phone interview. “So maybe they were really trying to motivate him to provide solid value to shareholders right after the IPO.”
GoPro shares dropped below $44.24 -- the higher of the two thresholds required for vesting -- in February and recovered on April 10. Because Woodman’s shares have already vested, he’ll still collect the stock.
Cheniere’s Souki became the highest-paid executive in 2013 by getting 6.3 million restricted shares valued at $132.9 million when they were granted in February of that year. He also received a $3.68 million bonus, a $4.2 million cash incentive and an $800,000 salary. Cheniere, a Houston-based natural gas exporter, said last year it would cut Souki’s pay after investors protested against the 6.3 million restricted stock units.