A restricted stock unit becomes shares at vest and is worth whatever the shares are worth, which is more than zero unless the company is. An option is the right to buy at a fixed strike price and is worth nothing until the price rises above that strike. Treating a headline option grant as if it were cash is the single most expensive mistake in offer comparison.
Two instruments, very different risk
Restricted stock units become shares on vesting. If the price falls they are worth less; unless it reaches zero they are worth something. They are close to deferred cash with price risk.
Options give you the right to buy at a fixed strike price. If the market price sits below the strike they are worth nothing at all, and you have to pay to exercise. Same word in conversation, completely different instrument.
Public and private are further apart still
Public company shares have a market price you can look up and sell into. Value them at the current price with a discount for the vesting wait and the concentration risk of holding your employer’s stock while employed there.
Private company equity has no market. The stated value comes from a funding round that may not repeat, and it may never convert into money at all. Valuing it at the number in the offer letter is the most common overvaluation in compensation.
The questions that actually price private equity
How many shares, out of how many total — a share count without a denominator is meaningless. What was the most recent valuation and when. What is the strike price against the current preferred price. And what liquidation preferences sit above you.
That last one decides whether common shareholders receive anything in a modest exit. Employers comfortable with their equity story answer these; hesitation is informative.
The exercise problem
Vested options typically must be exercised within about 90 days of leaving. Exercising costs the strike price per share, plus a possible tax bill in the same year even where there is no market to sell into.
So private options can require real money at the exact moment you have least — which is why people forfeit vested equity they genuinely earned. Know the number before you need it.
Refresh grants are the part people miss
An initial grant vesting over four years produces a cliff in year five unless refreshes arrive. Ask what refresh grants have looked like for people at your level, because a package that assumes the initial grant continues indefinitely overstates years four onward.
Conversely, rolling refreshes mean there is always unvested value, which is the retention mechanism working as designed. Naming that is useful when you feel unable to leave.
How to put it in a comparison
Public RSUs: annualized grant value, discounted for the vesting schedule and for holding a single stock. Public options: intrinsic value only, and treat the upside as upside.
Private equity: for a package comparison, close to zero, with the upside noted separately as a bet you are choosing to take. That is not cynicism — it is how you avoid accepting a lower cash offer on the strength of a number nobody can convert.
Concentration risk deserves a mention
Holding equity in your employer means your salary and a chunk of your savings depend on the same company. If it struggles, both fall at once, which is precisely the wrong correlation.
The standard response is to sell vested shares reasonably promptly and diversify, rather than holding because it feels disloyal. That is a personal decision and worth making deliberately rather than by default.
Before signing
Get the grant type, the vesting schedule, the strike price, the exercise window after leaving, and what happens on acquisition — all in writing.
This is general information rather than tax or investment advice, and equity taxation in particular depends heavily on the instrument and your circumstances.
Common questions
What is the difference between RSUs and options?
RSUs become shares at vest and are worth whatever the shares are worth. Options are the right to buy at a strike price and are worth nothing until the price is above it.
How do I value a grant?
Price it as if the share price never moves, and count only the portion vesting inside the time you expect to stay.
Is private company equity worth anything?
Possibly a great deal, and you generally cannot sell it until a liquidity event. A valuation is a calculation, not a buyer.
When am I taxed?
RSUs are generally taxed as income at vest whether or not you sell. Options differ by type and can create a bill on exercise, which is a question for a tax professional.
Should equity go in the salary comparison?
Keep it beside the comparison rather than inside it, especially when it cannot be sold. It is a different kind of number from cash.
What is the difference between RSUs and options?
RSUs become shares on vesting and retain value unless the price hits zero. Options are the right to buy at a strike price, and are worth nothing if the market price is below it.
How should I value private company equity?
For a package comparison, close to zero, with the upside noted separately as a bet. It has no market, and the stated value comes from a round that may not repeat.
What is the exercise trap?
Vested options typically must be exercised within about 90 days of leaving, costing the strike price plus possible tax — even with no market to sell into.