Double-Trigger RSUs
Definition
Double-trigger RSUs are private-company restricted stock units that generally require two events before shares are delivered: continued service over time and a liquidity event such as an IPO, direct listing, acquisition, or sometimes a qualifying tender. The structure is common at late-stage private companies because it can defer tax and share issuance until liquidity is more plausible.
Why it matters
Double-trigger RSUs shape employee liquidity, secondary supply, tax timing, and pre-IPO valuation analysis. A company can have substantial employee equity value on paper while holders cannot sell because the liquidity trigger has not occurred. Secondary investors should distinguish actual transferable shares from unvested or unsettled RSUs that may never become saleable before a company event.
Common misconceptions
- •Time-based vesting alone may not make double-trigger RSUs deliverable.
- •RSUs are not the same as options; there is usually no exercise price, but tax timing can be material.
- •A tender offer may not satisfy the liquidity trigger unless the plan or board explicitly allows it.
Technical details
The two triggers
The service trigger is usually met over a vesting schedule, such as four years. The liquidity trigger is tied to an IPO, acquisition, direct listing, or other qualifying event.
Until both triggers are satisfied, the employee may have a contractual right to future shares but not fully issued, transferable shares.
Plans can vary: some companies use single-trigger RSUs, some use double-trigger settlement, and some modify terms as IPO timing changes.
Tax and liquidity consequences
When RSUs settle, the value is generally treated as compensation income. If settlement happens without enough liquidity, employees can face tax bills before meaningful cash proceeds.
Double-trigger design attempts to avoid that mismatch by delaying settlement until liquidity, but it can also delay employee access to value.
Diligence questions
Is the asset being sold actual shares, vested options, exercised shares, RSUs, or an SPV interest?
Does a tender offer, acquisition, IPO, or direct listing satisfy the liquidity trigger?
Are shares subject to company consent, ROFR, lock-up, or transfer restrictions after settlement?