Employee equity
Employee stock options and fully diluted ownership
An option grant means little as a raw number of shares. It only becomes meaningful as a percentage of the fully diluted total — including the unissued option pool — together with the exercise price and the vesting schedule. Those four figures are what an employee needs, and what a company should be able to produce without a spreadsheet exercise.
Prepared by Perseids · Published · Updated
The four numbers that matter
- Number of options granted.
- Fully diluted share count on the grant date, so the percentage is real.
- Exercise (strike) price.
- Vesting schedule, including cliff and any acceleration.
Why the percentage falls over time
Every later round, pool increase and conversion grows the denominator, so a grant's percentage declines even though the number of options does not change. That is normal dilution, not a mistake. What matters is whether the value of the smaller percentage grew.
Vested is not the same as owned
| State | Meaning |
|---|---|
| Granted | Options allocated to the holder, subject to vesting |
| Vested | Options the holder is entitled to exercise |
| Exercised | Options converted into actual shares, on payment of the exercise price |
| Lapsed | Options lost, typically after leaving or expiry, returning to the pool |
Granted
- Meaning
- Options allocated to the holder, subject to vesting
Vested
- Meaning
- Options the holder is entitled to exercise
Exercised
- Meaning
- Options converted into actual shares, on payment of the exercise price
Lapsed
- Meaning
- Options lost, typically after leaving or expiry, returning to the pool
What employees should be able to see
Their own grant, vesting progress, exercised amount and current fully diluted percentage — without seeing anyone else's position. Perseids provides that as a self-serve employee view over the same ledger the company maintains.
Prepared by Perseids for general information. It is not legal, tax or investment advice — confirm your specific situation with your advisers.
Frequently asked questions
- Do unvested options count in fully diluted ownership?
- Yes. Fully diluted is a maximum-dilution basis, so both vested and unvested granted options are included, along with the unissued pool.
Put this into practice with Perseids.
Explore Perseids