Why do RSUs typically have no strike price when considering diluted shares?

Why do RSUs typically have no strike price when considering diluted shares?

• A. They are granted as cash.
• B. They vest only upon immediate vesting.
• C. They are options with no strike price.
• D. They vest based on time or performance and are issued as shares without exercise.

Answer: (D)

The key idea is that RSUs are not options. They are promises to issue actual shares once certain vesting conditions (time or performance) are met. Because there’s no option to purchase at a set price, there’s no strike price involved. When RSUs vest, they convert into shares, increasing the number of shares outstanding and thus diluting existing holders. That’s why RSUs are treated as adding to diluted shares without any exercise price. The other statements don’t fit because RSUs are not cash grants, they don’t vest all at once by default, and they aren’t options.

The key idea is that RSUs are not options. They are promises to issue actual shares once certain vesting conditions (time or performance) are met. Because there’s no option to purchase at a set price, there’s no strike price involved. When RSUs vest, they convert into shares, increasing the number of shares outstanding and thus diluting existing holders. That’s why RSUs are treated as adding to diluted shares without any exercise price. The other statements don’t fit because RSUs are not cash grants, they don’t vest all at once by default, and they aren’t options.