Nike employees may receive stock options or restricted stock units (RSUs) as part of their compensation package.
Nike employees deciding on their annual stock award can choose between Nike stock options (NSOs) and restricted stock units (RSUs).
Understanding the differences between Nike RSUs and NSOs can help you maximize the benefits of your stock award.
Every August eligible employees can choose between 100% stock options (NSOs), 100% restricted stock units (RSUs), or a 50/50 mix of NSOs and RSUs.
Stock Options vs. RSUs: What Nike Employees Need to Know
Typically, you are offered more shares if you choose Nike stock options (NSOs) over restricted stock units (RSUs).
This doesn’t mean electing 100% NSOs is the best choice for you though. Here are some key differences between RSUs and Stock Options to help you with your decision.
Understanding Nike RSUs
Nike RSUs are simpler to manage. They are also less risky than NSOs, 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 an RSU share vesting on Sept 1, 2024, and the value of NKE stock price is $80, your RSU is worth $80 pre-tax.
How Are Nike RSUs Taxed?
Your RSUs will be taxed as income in the year in which they vest. This gives you less control over how much and when you must pay taxes on this income.
What happens to my RSUs if I leave Nike?
If you leave the company, your vested Nike RSUs are yours to keep. You will lose any unvested Nike RSUs.
Navigating Non-Qualified Stock Options (NSOs)
NSOs are more complicated to manage. They are also riskier than RSUs.
For your NSOs to have value, there must be an increase in the NKE stock price after the grant date.
For your 2024 NSOs, the grant date will be 9/1/2024. The value of your NSOs 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 NSOs have value. If the price goes down or stays flat, your NSOs have no value.
How Are Nike NSOs Taxed?
You do have more control over your taxes with NSOs, because you choose when you exercise them. You’re taxed on the difference in price between the strike price (the price at grant) and the price at exercise, which is when you buy the stock.
What happens if you leave Nike?
If you leave the company, you only have 3 months to exercise your NSOs, if you don’t, you will lose them.
Further Considerations for Your Nike Stock Choice Decision
If you’re early in your career at Nike and expect the stock price to rise, NSOs might offer higher potential rewards. However, if you prefer more certainty and less risk, RSUs could be a safer bet.
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?
Still Unsure on Which Option is Right for You?
Reach out to our team. We will talk through your situation and long-term goals to help you make the best decision for you.