Every August, Nike employees must make an important decision on how to receive their annual stock award
Eligible employees can choose between 100% Stock Options, 100% Restricted Stock Units (RSUs), or a 50/50 mix of Stock Options and RSUs.
Typically, you are offered more shares if you choose Stock Options over RSUs. In 2022, the ratio of Stock Options to RSUs decreased from 5:1 to 4:1. Meaning you receive 4 Stock Options for every one RSU.
This doesn’t mean electing 100% Stock Options is the best choice for you though.
Here are some key differences between RSUs and Stock Options to help you with your decision.
Restricted Stock Units (RSUs)
RSUs are simpler to manage and not as risky as Stock Options.
They have less risk since your Nike RSUs do not require the NKE stock price to increase in order to have value. The value of your Nike RSU is based on the value of NKE stock on the day your RSUs vest. For example, if you have a RSU share vesting on Sept 1, 2022, and the value of NKE stock price is $100, your RSU is worth $100 pre-tax.
You are taxed on the day your RSUs vest. This gives you less control over how much and when you must pay taxes on this income.
Your vested Nike RSUs are yours to keep even if you leave the company.
Stock Options are more complicated and riskier than RSUs.
For your Stock Options to have value, there must be an increase in the NKE stock price after the grant date. For your 2022 Stock Options, the grant date will be 9/1/2022. The value of your Stock Option is based on the difference between the stock price on the date it is exercised and the price on the date of the grant.
If the stock price goes up – your stock options have a value. If the price goes down or stays flat – your stock options have no value.
For example, in 2021 if you chose Stock Options as your stock choice you received those options on 9/1/2021. The grant date price was $164. At the time this blog was published, NKE stock was trading at $110. This means your 2021 stock options have no value right now. You would not pay $164 for something that is only worth $110.
You do have more control over your taxes with Stock Options. You decide when you want to exercise your options.
One final consideration about stock options. If you leave the company, you only have 3 months to exercise those options. If you don’t, you will lose them.
Further Considerations for Your Nike Stock Choice Decision
There are other factors you may want to consider before making this important decision, such as:
- What is your risk tolerance?
- When do you plan to use the income from your stock payout?
- How old are you?
- How much control do you want over your taxes?
- How long do you plan to stay with Nike?
- Do you have a diversified portfolio, or does it contain a large concentration of NKE stock?
These are a few of the questions we ask Nike employees. We want to help you have the information you need to make the best decision for your situation.