Glossary

ESOP terms, in plain language.

The same explanations appear next to every term inside your dashboard.

409A valuation (US): An independent valuation US private companies use to set exercise prices.
Cliff: The minimum time you must work before any options vest.; With a one-year cliff, nothing vests for 12 months; then the first year's share vests in one go.
Dilution: Your percentage of the company shrinks when new shares are issued.
Employer-verified: Approved by an authorised admin at your company, with an audit trail.
Entered by you: Typed or uploaded by you. Your employer hasn't confirmed it.
ESOP: A right your company gives you to buy its shares later at a price fixed today.; Employee Stock Option Plan. You receive options, not shares. Shares only become yours after you exercise (pay for) them.
ESOP pool: The total number of options a company has set aside for employees.; Your share of the pool is not your share of the company. Ownership is measured against fully diluted shares.
Exercise: Paying the exercise price to turn vested options into actual shares.
Exercise price: The fixed price you pay per share when you exercise an option.; Also called the strike price. It's set in your grant letter and doesn't change when the company's value changes.
Expiry date: The last date you can exercise. Unexercised options are lost after it.
Face value: The nominal value printed on a share in company records, often ₹1 or ₹10.; Face value is an accounting figure. It says nothing about what a share is actually worth.
Fair market value (FMV): The estimated worth of one share on a specific date, from a formal valuation.; For unlisted Indian companies this usually comes from a registered valuer's report. It's only valid for the date it was measured.
Forfeiture: Losing options, typically the unvested ones when you leave.
Fully diluted shares: All shares, plus all options and convertibles, counted as if they were shares.
Grant date: The date the company formally gave you the options.
Intrinsic value: FMV minus exercise price, times your options. A snapshot, not money in hand.; It ignores tax, the fact that unlisted shares are hard to sell, and any investor preferences in a sale.
ISO (US): Incentive stock option: a US option with potential tax advantages if holding rules are met.
Liquidation event: An event where shareholders can be paid, such as an acquisition, IPO or wind-down.
Liquidation preference: Investors' right to be paid back first, before common shareholders, in a sale.; Because of preferences, an acquisition price per share doesn't automatically equal what employees receive per share.
Lock-in: A period after an IPO when you're not allowed to sell your shares.
NSO (US): Non-qualified stock option: a US option taxed as ordinary income on exercise.
Option: The right, but not the obligation, to buy one share at the exercise price.; An option is not a share. Until you exercise it, you don't own part of the company.
Perquisite tax (India): Income tax on the gap between FMV and exercise price on the day you exercise.; In India the benefit on exercise is taxed as salary income. Selling the shares later can create a separate capital gains tax.
Post-termination exercise window: How long you have to exercise vested options after leaving.; This varies widely between companies and is set in your plan or grant letter.
Share class: A category of shares with its own rights. Different classes can have different values.
Underwater: When the FMV is below your exercise price, so exercising would cost more than the shares are worth.
Unvested options: Options you haven't earned yet. They're usually lost if you leave.
Vested options: Options you've earned and can exercise, subject to your plan's rules.
Vesting: How you earn the right to exercise your options over time.; Options usually vest gradually while you keep working at the company, for example monthly over four years.
Vesting start date: The date your vesting clock starts. It can differ from the grant date.