What is a Vest Fleece?
A vest fleece occurs when a company accelerates the stock options.of its employee
How Does a Vest Fleece Work?
For example, let's assume that John Doe receives options to buy 2,000of Company XYZ, his employer, for $10 a share. He receives the options as part of his compensation package.
Normally, his shares vest over a five-year period, meaning they do not become exercisable for five years. However, Company ABC comes along and buys a 51% stake in Company XYZ. Because this constitutes a change in control, John Doe's options automatically vest even though five years has not elapsed. John exercises his options at $10 a share, sells the shares for $20 a share, and walks away with a tidy profit.
Why Does a Vest Fleece Matter?
Vest fleecing occurs when a fully vested.becomes exercisable earlier than originally scheduled. Changes in control are a common reason, but ultimately companies have the authority to decide if an employee is suddenly
Acceleratedcan be a windfall to employees that have , though some tax consequences can exist. Depending on the type of , John Doe might need to pay on the value of the shares ($10) as well as the on the from the of those shares.