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Glossary

Equity Grant

An equity grant is an award of company shares or share-based rights, such as stock options or restricted stock units, given to an employee, director or other person as part of compensation.

What Is an Equity Grant?

An equity grant is a form of equity compensation in which a company gives a person an ownership stake or the right to acquire one in the future. Grants are most often made to employees, executives and board members, though they can also go to contractors or advisers. Instead of, or in addition to, a salary, the recipient receives an award tied to the company's stock, so their financial outcome is linked to the share price over time.

Common Types of Grants

  • Stock options: the right to buy a set number of shares at a fixed price, called the exercise price, after a waiting period.
  • Restricted stock units (RSUs): a promise to deliver actual shares, or their cash value, once certain conditions are met.
  • Restricted stock: actual shares issued up front but subject to conditions that limit when they can be sold or may be forfeited.

Vesting and Timing

Most grants do not belong to the recipient right away. They vest over time, meaning the recipient earns the right to them gradually, often on a schedule based on time worked and sometimes on performance goals. A common arrangement is a multi-year schedule with a cliff, which is a initial period before any portion vests. If the recipient leaves before vesting is complete, unvested awards are generally forfeited. The date the award is formally approved is called the grant date, and it is often the reference point for valuing the award. Terms vary widely and are set out in the grant agreement.

Why Grants Matter to Investors

Grants can increase the number of shares outstanding, which can cause dilution of existing shareholders' ownership. When options are exercised or RSUs settle, new shares may be issued or existing shares may be repurchased. Investors reviewing a company's filings often look at the total grants and the expense recognized for them, since stock-based compensation is a real cost even though no cash changes hands when the award is made. Accounting standards require companies to record this expense in their financial statements.

Updated November 4, 2026. For general education only; not financial, tax or legal advice.

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Related Terms

Equity Compensation

Equity compensation is a form of non-cash pay that gives employees or other service providers an ownership stake in their employer, usually through company shares or rights to acquire them.

Stock Option

A stock option is a contract that gives its holder the right, but not the obligation, to buy or sell a stock at a fixed price on or before a set expiration date.

Restricted Stock Unit (RSU)

A restricted stock unit is a promise from an employer to give an employee shares of company stock, or their cash value, once certain conditions such as a vesting period are met.

Dilution

Dilution is the reduction in an existing shareholder's ownership percentage, or in per-share measures such as earnings, that occurs when a company issues new shares.

Vesting

Vesting is the process by which an employee or other recipient earns full ownership of equity or retirement benefits over time, typically by remaining with the employer for a set period.

Exercise Price

The fixed price at which the holder of an option contract can buy or sell the underlying asset if they choose to exercise the contract. It is also called the strike price.

Employee Stock Purchase Plan (ESPP)

An Employee Stock Purchase Plan is a company-sponsored program that lets workers buy company shares, often at a discount, through regular payroll deductions.