I got hit with a new equity compensation fugazi with RSUs at a small public company recently.
My offer letter pledged something like $100,000 of stock, vesting over four years. I was told that I would receive the grant within the first three months of my employment, once it was approved by the board.
Once I finally received the grant, it was 1/5 of what it should have been. “What gives?”, I inquired.
Apparently the stock incentive plan has a “price floor” for grants at $5 / share, and the stock had plunged to approximately $1 / share at my time of hire.
So my offer letter says my grant is for $100k, but in reality it’s $20k.
I learned this was because there was a limited pool of stock available for employee award grants, and a recent rout in the stock price meant there was an insufficient amount of stock available for grants.
Apparently going forward, offer letters specify the number of RSUs rather than a $ amount. So I guess a charitable interpretation is that it may not have been so much an intentional deception as a set of unfortunate circumstances coming together with some poor oversight on the details of my offer letter.
Still, I am incensed.
I referred to a previous employer’s offer letter and RSU grant for comparison. The offer letter also specified a $ amount, and did not specify how it would determine the price of the stock to calculate the awards by.
In that case, it seemed to be the average closing price of the stock in the month the award was granted. Which I’m content with, but these details also were not specified in the offer letter.
tldr if you get an offer letter for a $ amount of RSUs, make sure to clarify (in writing) how the valuation of the stock is determined for the calculation of the number of units awarded.
This is strange and possibly illegal. If the stock falls, you should get more stock since they’re worth less. If they don’t have enough stock then they shouldn’t have offered you that as compensation.
In any case… $1- $5 is penny stock territory. I believe you get delisted from NYSE if ur stock stays at $1 for too long.
Oh that is bad! It is a 20k/y pay cut you weren't expecting.
If they were keen to make amends they should just bump your pay that much. Unless they are struggling.
By the way I have a similar RSU amount and schedule. So gar so good but cognizant that in the contract they can stop it at any time. I took the risk as I can also quit at any time!
All of the RSU offers I ever got stipulated the grant was "subject to the approval of the board", i.e., not guaranteed. That said, I'd be absolutely livid if something like this happened, and would be expecting my manager to either make it right, or I'd look for a new job at the first available opportunity.
You can't do good business with bad people.