What does vested performance right (equity package) mean for me?


Hi everyone. I’m struggling to understand what it means to me that I received X performance rights with Y exercise price.

The company I work for added this in my compensation which was a pleasant surprise a while ago. The performance rights are vested as of today for me. The company hasn’t IPO’d yet. I don’t understand what options I have to capitalise on that. Do performance rights mean that I can sell the rights to the other shareholders (internally) and gain X*Y? Or does it mean that when a company IPOs and stock is worth Z, I can sell my shares and gain (Z-Y)*X?


In: 6

That means you have the right to buy Y shares at X price. Assuming ” Y performance rights” corresponds to Y shares. Pre IPO it really should correspond directly to some known percentage of equity. At IPO the percent equity each share represents can shift to target a certain price, but the percent equity “Y performance rights” represents shouldn’t change.

Performance rights just means that if you were a crap employee (did not meet performance targets) they could decide to not give it to you before vesting. But they’ve vested so now they are yours.

In any case the idea is that if your the company grows and the shares increase in value beyond price X, say 1.5X you could exercise your right to buy all Y of them them at X, then immediately sell them for 1.5X. now you’ve made 0.5X*Y dollars. Basically the (Z-Y)*X formula.

If the share price drops below X because your company is valued poorly, you would actually loose money by exercising them and reselling. But you can also just ignore it, you aren’t out any money directly. Though it does suck that your benefits turned out worthless.

You can sell your excise rights to anyone. But it can be kindof tricky to find someone to buy them off you for a decent price. Selling to other employees or maybe back to the company if the company allows it is an option though.