As founders progress, they often reach a point where their salary alone is no longer enough. Senior team members, in particular, want to have a stake in the company’s outcome, rather than just receiving a paycheck.
Phantom stocks let companies reward employees with equity-like benefits without diluting ownership. Employees feel invested while owners keep control.
But managing phantom stocks comes with its own administrative complexities. That’s where Eqvista steps in.
Eqvista, one of the leading cap table management and equity administration platforms, fully supports phantom stocks. Whether you are a startup founder, CFO, HR manager, or equity administrator, Eqvista makes issuing, recording, and managing phantom stocks seamless, transparent, and efficient.
We will walk you through everything you need to know about phantom stocks, why they matter, and how to issue phantom stocks on Eqvista.
What are Phantom Stocks?
Phantom stock is a form of deferred employee compensation that simulates stock ownership without issuing actual shares. Employees receive cash or equivalent benefits tied to the company’s stock value.
In simpler terms, phantom stocks “mimic” the value of real shares. As the company’s value grows, so does the phantom stock payout. When the triggering event occurs (such as a liquidity event, a company sale, or an IPO), employees receive a payment equal to the appreciation or the full value of the phantom units.
Types of Phantom Stocks
There are primarily two types of phantom stocks that companies issue:
Full Value Phantom Stocks
Full-value phantom stock pays the employee the full value of the underlying share at the time of payout. For example, if the company’s share is worth $50 at the triggering event, the employee receives $50 per phantom unit.
Appreciation Only Phantom Stocks
Appreciation-only phantom stocks pay the employee only the increase in value from the grant date to the payout date. For instance, if the share was worth $20 at grant and $50 at payout, the employee receives $30 per phantom unit.
Understanding these two types is crucial when setting up phantom stock plans, and Eqvista accommodates both models within its platform.
| Feature | Appreciation Only | Full Value |
|---|---|---|
| What Employee Gets | Only the gain in share price from grant to payout | Full share price at payout (original value + appreciation) |
| Example | Granted at $20/share, worth $50 at vesting → Gets $30/share | Granted at $20/share, worth $50 at vesting → Gets $50/share |
| If Stock Price Drops | Employee gets nothing (no downside payout) | Employee still gets the original grant value |
| Best For | Conservative companies; limited payout budget | Generous retention; high-value talent |
| Tax Treatment | Taxed on appreciation only | Taxed on full amount received |
| Payout Example (100 shares) | ($50 - $20) × 100 = $3,000 | $50 × 100 = $5,000 |
How Does Eqvista Support Phantom Stock
Eqvista simplifies the management of phantom stock by treating it like regular equity on its platform. This allows for straightforward record-keeping, making it easy to monitor everything – whether it’s actual equity or phantom stock – all in one place.
Here’s what Eqvista offers for phantom stocks:
- Plan creation and customization – Create phantom stock plans tailored to your company’s specific needs.
- Grant issuance – Issue phantom stock units to individual employees with ease.
- Vesting schedule management – Set up cliff, graded, or custom vesting schedules.
- Cap table integration – View and manage phantom stocks alongside your full cap table.
- Employee portal access – Employees can view their phantom stock grants, vesting status, and estimated value.
- Record-keeping – Maintain accurate records of all phantom stock grants for compliance and reporting.
- 409A valuation integration – Connect phantom stock values to your company’s latest 409A valuations.
With Eqvista, you can eliminate manual spreadsheets and confusion when managing phantom stock programs, streamlining everything into a centralized, automated, audit-ready system.
Prerequisites Before Issuing Phantom Stocks on Eqvista
Before you start issuing phantom stocks on the Eqvista platform, make sure you have the following in place:
- An active Eqvista account – Sign up if you don’t already have an Eqvista account.
- Company profile set up – Ensure your company’s basic details, share classes, and cap table information are updated in Eqvista.
- A phantom stock plan document – While Eqvista facilitates management, it’s advisable to have a legally drafted phantom stock plan approved by your legal counsel.
- Employee information – Have the details of employees you wish to grant phantom stocks to ready (name, email, designation, etc.).
- Grant details ready – Know the number of phantom units, grant date, vesting schedule, and strike price (if applicable) before proceeding.
Issuing Phantom Stocks on Eqvista
You do not need to modify your existing equity structure to utilize phantom stocks on Eqvista. If your company profile and cap table are already on the platform, you are ready to proceed.
The workflow looks like this:
- Create a Phantom Stock Plan under your equity plans section.
- Add the relevant employees as stakeholders (if not already added)
- Issue grants with vesting and payout details
- Notify employees and collect digital acceptance.
- Track, update, and manage everything from your dashboard.
For the complete step-by-step walkthrough with screenshots, refer to Eqvista’s official support guides:
- How To Issue Phantom Stock On Eqvista
- How To Issue And Record Phantom Stocks On Eqvista
- How Phantom Stock Is Recorded On The Equity Page?
- How Is Phantom Stock Recorded In The Cap Table?
- How Is Phantom Stock Recorded In Reports?
- How Is Phantom Stock Repurchased?
Benefits of Using Eqvista for Phantom Stock Management
Managing phantom stocks through Eqvista offers significant advantages over manual methods:
- Centralized Management: All your equity, stock options, warrants, RSUs, and phantom stock in one place. No more scattered spreadsheets.
- Accuracy and Compliance: Automated calculations reduce human error. Eqvista ensures that all records are accurate and audit-ready, helping you stay compliant with financial reporting standards.
- Real-Time Visibility: Both employers and employees can see the real-time status of phantom stock grants, vesting progress, and estimated value , promoting transparency and trust.
- Time-Saving Automation: Automated vesting calculations, notifications, and reporting save your HR and finance teams countless hours of manual work.
- Scalability: Whether you have 5 employees or 500, Eqvista scales with your program. As your company grows, adding new grants, new plans, and new stakeholders is straightforward.
- Employee Experience: Employees have access to a dedicated portal to track their phantom stock, view their vesting timeline, and see their potential payout , greatly enhancing engagement and satisfaction.
- Secure and Reliable: Eqvista uses bank-grade security to protect sensitive equity and financial data. All records are backed up and accessible at any time.
- Expert Support: Eqvista’s team of equity experts is available to help you design your phantom stock program, navigate the platform, and ensure your equity management is in order.
Who Should Consider Using Phantom Stocks?
Phantom stocks are ideal for:
- Startups that want to incentivize early employees without diluting founder equity.
- Private companies that are not ready for or interested in an IPO but want to offer equity-like incentives.
- Family-owned businesses where transferring actual ownership to non-family employees is not desired.
- S-Corporations have strict limitations on the number and type of shareholders.
- Companies with key employees or advisors they want to retain long-term.
Eqvista’s Pricing and Getting Started
Eqvista offers flexible pricing plans to suit companies of all sizes, from early-stage startups to established businesses. You can start with a free plan to manage basic cap table functions and upgrade as your equity management needs grow.
To get started with phantom stocks on Eqvista:
- Sign up for a free account.
- Set up your company profile.
- Navigate to Equity Plans and begin creating your Phantom Stock Plan.
- Issue your first phantom stock grant today!
For more detailed guidance, Eqvista also offers onboarding support and demos to walk you through the platform and help you set up your phantom stock program correctly from day one.
Reward Your Team Without Giving Away Equity: Eqvista Makes It Simple
Giving your top performers a stake in the company’s success can be a powerful motivator, and phantom stock is a great way to do so without messing with the ownership structure or complicating your equity compensation strategy. By using phantom stock, you can align your team’s interests with the company’s goals, driving growth and success without sacrificing ownership or control.
Eqvista is built for exactly this. From issuing your first phantom grant to tracking vesting schedules and generating audit-ready reports, everything runs on one platform. No spreadsheets, no manual calculations, no loose documents sitting in someone’s email.
Sign up with Eqvista now, and you can start issuing phantom stock grants right away – it only takes a few minutes, around 10 minutes or less, to get your first one set up. If you’re already on Eqvista, the phantom stock feature is ready and waiting. If you’re not yet on the platform, there’s never been a better time to start.
