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Five Trends in Private Company Stock Plans

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February 12, 2019 | Barbara Baksa

Five Trends in Private Company Stock Plans

For today’s blog entry, I have five trends from the NASPP’s survey on equity compensation at private companies.

Trend #1: Stock options are the equity vehicle of choice.

Stock options are still popular among private companies, with 74% of respondents granting them. In contrast, just 51% of public companies grant stock options. Stock options are especially popular in Silicon Valley, where 92% of private companies grant them.

Trend #2: Private companies are still committed to ISOs.

Among private companies that grant stock options, close to 60% grant ISOs (81% in Silicon Valley). At public companies that grant stock options, only 18% grant ISOs.

Trend #3: When deciding who to grant to, it’s all or nothing for private companies.

Private companies either grant to over 80% of employees (46% of respondents) or less than 20% (47% of respondents). 35% of private companies grant equity to all employees. Broad-based equity is even more common among private companies in Silicon Valley: 84% of companies grant to over 80% of their employees and 65% grant to all employees.

Trend #4: Vesting upon IPO is not the norm.

Only 36% of private companies that grant stock options make vesting contingent upon an IPO or CIC. This percentage increases to 41% for private companies that grant restricted stock/units. Monthly vesting is more popular, with over half of companies that offer stock options using it (81% of companies in Silicon Valley).

Trend #5: Qualified equity grants are a big meh.

85% of private companies reported that they are neutral or undecided about the opportunity to offer qualified equity grants under new Section 83(i). Only 4% indicate that they are planning to modify their grants so that employees can make deferral elections under Section 83(i).

More Info

Want to know more? Look for the survey report to be published on next month and check out my webcast “Trends in Private Company Stock Compensation Plans,” hosted by Certent, tomorrow, February 13.

- Barbara

* Data on private company stock plans is from the NASPP’s 2018 Private Company Stock Compensation Survey. Data on public company stock plans is from the NASPP/Deloitte Consulting 2016 Domestic Stock Plan Administration Survey.

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