1

What does an 'exercise price' refer to in regards to a restricted stock award? I was under the impression that the exercise price was how much a stock can be bought for, but it doesn't seem to make sense in this context.

For example, if someone will receive a restricted stock award of 1000 shares at a to-be-decided exercise price, what does the exercise price refer to?

1

It's still the purchase price or the price at which the shares are purchased or granted. This Investopedia article describes how the price is used for tax purposes:

The amount that must be declared [for tax purposes] is determined by subtracting the original purchase or exercise price of the stock (which may be zero) from the fair market value of the stock as of the date that the stock becomes fully vested.

Restricted stock awards are similar to stock options. The employer promises to grant the employee a certain number of shares upon the completion of the vesting schedule. The price at which the shares are purchased (or granted, if the price is zero) is the exercise price.

  • Thank you; I didn't know that the price could be zero. – rawr Aug 20 '13 at 2:44

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.