Equity

Dividend Suspension and Its Effects on Shareholders What happens when a company suspends its dividend: stock price reaction, tax consequences, and what rights shareholders retain.

Double-Trigger Acceleration Vesting schedule that accelerates only when both an acquisition occurs AND the employee is involuntarily terminated.

Drag-Along Obligation A shareholder right allowing majority owners to compel minority shareholders to sell their shares on the same terms.

Drag-Along Rights A contractual provision allowing majority shareholders to force minority shareholders to sell their shares in a transaction, ensuring a clean exit in acquisitions or other corporate events.

Drag-Along vs Tag-Along Rights in Equity Agreements The two protective mechanisms in shareholder agreements: which party each right serves when a majority forces a sale or a minority joins one.

Dual-class shares Dual-class shares are two distinct categories of common stock issued by the same company, typically differing in voting power, allowing founders to retain control of a public company.

Dual-Class Structure Two share classes with different voting rights and economic interests, concentrating control in founders.

Dual-Track Process Simultaneous pursuit of an IPO and a private sale to maximise a seller's exit options and negotiating leverage.

Dutch Auction Repurchase A share buyback mechanism in which shareholders indicate the price at which they would sell their shares, and the company sets a final price that maximizes the number of shares repurchased within its budget.

Dutch auction tender offer A Dutch auction tender offer is a formal share repurchase in which a company offers to buy back a specified number of shares at a price set by an auction process, allowing shareholders to bid different prices.

Early Exercise and the 83(b) Election for Stock Options When to exercise unvested stock options early and file an 83(b) election, the 30-day deadline, and implications if the company never exits.

Early Exercise of Stock Options Explained Early exercise of stock options explained: startup employees can exercise vested options before they fully vest to minimize taxes and lock in capital gains treatment.

Earnings Per Share Calculation The ratio of a company's net income to outstanding shares; fundamental metric for measuring profitability on a per-share basis and tracking earnings trends.

Economic Dividend Value returned to shareholders beyond cash distributions, including share buybacks, reinvested earnings, and increased intrinsic value.

Emerging Growth Company Confidential IPO Filing Explained Emerging Growth Companies can file S-1 IPO documents confidentially with the SEC before public announcement. Learn how the JOBS Act changed the IPO process.

Employee Shares Equity securities issued to employees as compensation or as part of employee ownership plans, often subject to purchase terms or vesting conditions.

Employee stock options Employee stock options (ESOs) are the right to purchase company shares at a fixed strike price after a vesting period, allowing employees to benefit from stock price appreciation.

Employee stock ownership plan An employee stock ownership plan (ESOP) is a qualified retirement plan that invests primarily in employer stock, allowing employees to build equity ownership in their company.

Employee stock purchase plan An employee stock purchase plan (ESPP) is a qualified plan that allows employees to purchase company stock at a discount, typically 10–15% below fair market value.

Employee Stock Purchase Plan (ESPP) Offering Mechanics ESPP offerings allow employees to buy company stock at a discount through regular payroll deductions; the structure, lookback period, contribution limits, and tax treatment determine real value.

Empty Voting and Its Effect on Shareholder Democracy Empty voting occurs when investors hold voting shares but lack economic ownership. Learn how derivatives and lending separate voting from economic risk.

Equity Audit A comprehensive review of a company's equity records, cap table, and grant history to verify accuracy, identify errors, and ensure compliance with tax and regulatory requirements.

Equity Carve-Out vs Spin-Off: Structural Differences The difference between equity carve-out (IPO of subsidiary stake) and spin-off (free distribution of shares to existing shareholders).

Equity Clawback Contractual right allowing an issuer to repurchase or cancel hybrid securities triggered by proceeds from a new equity offering.

Equity Clawback Provision: When Companies Reclaim Shares or Compensation Equity clawback provisions allow companies to recoup previously awarded shares or vested compensation when specific events occur, such as restatements or executive misconduct.

Equity Compensation Non-cash remuneration in the form of company stock, options, or equity units, typically used to supplement salary and align employee incentives with company performance.

Equity Compensation at a Private vs Public Company Equity compensation differs sharply between private and public companies. Learn how liquidity, valuation, and tax timing affect the real value of your grant.

Equity Compensation for Foreign-Based Employees Understand the tax, regulatory, and reporting layers when granting equity compensation to non-US employees: local withholding, treaty rules, and securities compliance.

Equity Crowdfunding Offering An SEC Regulation CF-governed offering allowing companies to raise up to $5 million from non-accredited retail investors through an online funding portal.

Equity Cushion The excess of asset value over liabilities that absorbs losses before creditors bear losses in insolvency.

Equity Dilution for Employees Explained How equity dilution for employees occurs through funding rounds and option pools, reducing ownership percentage and long-term value.

Equity Grant Letter The formal offer document that specifies the terms of an individual employee's equity award, including quantity, vesting schedule, and exercise price, binding both company and recipient.

Equity Linkage Structure where a security's payoff or value is contractually tied to the performance of an underlying equity or stock index.

Equity Liquidity Event A transaction (IPO, acquisition, sale, or secondary offering) that allows employees to buy, sell, or convert their unvested or vested equity into cash or public stock.

Equity Ownership Concentration The degree to which voting power and economic ownership in a company rests with a small number of shareholders, shaping governance and liquidity.

Equity Pool The total number of shares authorized for issuance as employee equity awards under a company's stock option or RSU plan, limiting the company's ability to grant equity without shareholder approval.

Equity Refresh Grant A new equity award issued to a current employee during their tenure, separate from their initial hire grant, to provide additional compensation and retention incentive.

Equity Tender Offer A structured buyback programme that allows employees to sell vested shares back to the company at an announced price.

ESPP Contribution Limit and Purchase Cap The IRS $25,000 annual limit on qualified ESPP purchases: how it's calculated, what happens when you hit it, and how offering periods factor in.

ESPP Lookback Provision Explained How the lookback feature in an employee stock purchase plan sets the purchase price and creates a guaranteed discount.

ESPP Qualifying Disposition: Rules and Tax Treatment Understand ESPP qualifying disposition rules, holding periods, and how the gain splits between ordinary income and capital gain.

European Depositary Receipt A receipt instrument enabling non-European companies to trade shares on European exchanges without full listing.

Ex-dividend Date The date on which a stock begins trading without the right to receive the next scheduled dividend payment.

Exchange Offer A corporate action offering security holders the right to exchange their existing holdings for a different security, typically at a pre-set ratio.

Exchangeable Preferred Stock Preferred stock that the issuer may convert into debt securities or other instruments at its option, effectively allowing refinancing at the issuer's discretion.

Exercise Price The fixed price at which an employee can purchase shares under an employee stock option agreement, set at or near the fair market value on the grant date.

Firm Commitment vs Best Efforts Underwriting Comparison of firm commitment and best efforts underwriting: which party bears risk for unsold shares and how each affects issuer certainty.

Fixed-to-Floating Preferred Preferred stock that pays a fixed dividend for an initial period, then resets to a floating rate tied to a benchmark such as SOFR or LIBOR.

Floating Rate Preferred Stock Preferred shares with a dividend that resets periodically based on a benchmark interest rate, such as SOFR or the prime rate.

Follow-on offering A follow-on offering (or seasoned equity offering) is an offering of new shares by a public company after its initial public offering, raising capital for the company.

Form F-6 Registration The SEC registration form specific to foreign company ADR programmes and disclosure requirements.

Founder shares Founder shares are equity stakes granted to company founders, typically carrying superior voting rights or favorable economic terms, or sometimes restricted by vesting schedules and transfer restrictions.

Founders Shares vs Common Stock Founders shares typically carry 10x voting power and reverse vesting; common stock carries one vote per share and immediate ownership. Understand the structural difference.

Four-Year Vesting The industry-standard equity vesting schedule where employee awards vest over four years, typically with a one-year cliff before the first tranche vests.

Fractional Share Voting Rights Whether fractional shares carry voting rights and what shareholders should expect when they own less than one full share.

Fractional Shares Sub-unit ownership of stocks enabled by modern brokers and dividend reinvestment programs, removing share-count barriers to investing.

Fractional Shares After a Stock Split: How Brokers Handle Them What happens to fractional share entitlements after a stock split, including cash-in-lieu payments, broker settlement methods, and rounding rules.

Full Ratchet Anti-Dilution An anti-dilution clause that reprices preferred stock to the lowest price paid in any subsequent financing round, regardless of round size.

Fully Diluted Shares Total shares outstanding including conversion of all employee options, warrants, convertible securities, and restricted stock units—a view of equity ownership as if all claims were exercised.

GDR Investor Rights vs Ordinary Shareholders GDR investor rights compared to ordinary shareholders: dividends, voting, corporate actions, and when you own less than you think.