In most scenarios when your RSUs vest you can sell them immediately and there is almost no tax impact. However, there is a special time in a company’s life where this is not true. However, if the stock reverts to the original IPO/Vesting date price, don’t hesitate to sell since there will be no additional tax benefit.

What happens to vested RSUs When a company goes public?

A liquidity event: This means the company goes public, either through a traditional IPO or a direct listing. Once both conditions have been met, any vested RSUs you own will turn into actual shares.

What happens when a restricted stock unit is vested?

RSUs are restricted during a vesting period that may last several years, during which time they cannot be sold. Once vested, the RSUs are just like any other shares of company stock. Unlike stock options or warrants which may expire worthless, RSUs will always have some value based on the underlying shares.

What’s the difference between restricted stock and common stock?

Restricted securities are common stock that become vested over time, regardless of whether they are part of an RSU or not. Restricted stock cannot be sold by the grantee until the shares are vested. In nearly all cases, the company has the right to repurchase all unvested shares if the employee leaves the company prior to becoming vested.

Can a company sell restricted stock to an employee?

Restricted stock cannot be sold by the grantee until the shares are vested. In nearly all cases, the company has the right to repurchase all unvested shares if the employee leaves the company prior to becoming vested. A person with a vested interest in restricted stock is considered a company shareholder.

Why are restricted stock awards called Restricted stock?

But the stock is “restricted” stock because you still need to earn them. The most common restrictions are time-based and involve a vesting schedule, which means you earn them over time. This incentivizes employees to stay with the company.