Restricted stock
Also known as: RSU
Restricted stock is company granted to an employee or executive as pay, which they only fully own once certain conditions are met, usually staying with the company for a set number of years. The most common form is the restricted stock unit, or RSU, a promise to deliver shares later. Until the shares vest, the employee cannot sell them and typically loses them on leaving the company.
Unlike a option, restricted stock has value even if the share price falls, since the employee receives the shares themselves rather than the right to buy them at a fixed price. When the shares vest, they count as taxable income, and many employees sell part of them right away to cover that tax bill.
For an investor, restricted stock matters in two places. It is a large part of at many companies, especially in technology, and each grant adds to the over time, diluting existing owners. And because grants and vesting show up in the same insider filings as open market trades, shares an executive receives or sells at vesting are routine pay, not a signal about the company's prospects the way an insider's own purchase can be.