Despite its misleading name, phantom shares are not real shares in the classic sense of the term. This type of shares is usually meant for employees and it entitles its owner to receive an amount of money on a certain date or under defined preconditions (for example, when the company managed to raise capital); it does not grant the owner an ownership upon certain percentage of the company as other types of shares do. The received amount is set by the market price of the shares and may include dividends that were accumulated until the “cashing” moment. Allocation of phantom shares encourages employees and does not dilute the shareholders’ portion of the company. Thus, for example, if the employee was granted 1000 phantom shares, when the market price is 5 Dollars per share, the employee will be entitled to receive an amount of 5,000 Dollars.
What are “Phantom Shares” ?
About the Author: Yana Sheinberg
Yana is a third-year student in the joint program of Law and Government at the IDC Herzliya. In her free time, Yana enjoys sports, reading and crafting.