Grant

Written By
Paul Tracy
Updated July 18, 2021

What is a Grant?

In the business world, a grant usually refers to a stock option grant. However, the term can also refer to federal funding for research, business ventures or partnerships.

How Does a Grant Work?

Let's assume that John Doe receives options to buy 2,000 shares of Company XYZ, his employer, for $10 a share. He receives the option grant as part of his compensation package. His shares vest over a five-year period, meaning they do not become exercisable for five years.

Accordingly, if Company ABC comes along and buys a 51% stake in Company XYZ and John Doe's options automatically vest, John could exercise his options at $10 a share, sell the shares for $20 a share, and walk away with a tidy profit.

Why Does a Grant Matter?

Option grants are incentive compensation that encourage employees to do work that increases the stock price and thus shareholder value, which is the primary objective of all businesses. A company's board of directors normally must approve option grants.

Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Grant.
Be the first to ask a question

If you have a question about Grant, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

If you have a question about Grant, then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Grant

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms