RSU

A Restricted Stock Unit is a promise — not actual shares — to deliver a specified number of shares once vesting conditions are met. At public companies, RSUs vest and settle (shares are delivered) on a schedule. At private companies, most RSU grants carry a double-trigger: they require both time vesting AND a liquidity event (IPO, acquisition) before shares are actually delivered.

For employees at pre-IPO companies, this creates a paradox: RSUs are fully vested on paper but worthless in hand until a liquidity event occurs. Unlike stock options, RSUs have no exercise price — but they also cannot easily be sold or used as collateral without that trigger.

Illustrative example: an employee receives 40,000 RSUs vesting over four years at a $10B-valued company. After four years, all 40,000 are "time-vested," but the company has not IPO'd. Without a tender offer or IPO, those RSUs cannot be converted to shares and have no liquid value, even though their paper value would be approximately $400,000 at the last-round price (illustrative only).

The gotcha: the tax treatment differs sharply from stock options. Once RSUs settle (shares are delivered), the full market value is taxed as ordinary income. An employee with a large block of RSUs settling at IPO can face a significant tax bill, and if the lockup prevents them from selling to cover taxes, they may need cash reserves. Plan accordingly.