Definition
Stock-like compensation arrangements that mimic equity ownership without actually granting shares, often used to avoid dilution or regulatory complications. All the incentive alignment with bonus legal complexity.
Example Usage
The startup offered employees synthetic equity through phantom stock, which sounds made-up because it literally is made-up stock.
Origin
Financial engineering terminology from corporate compensation structures
Fun Fact
Synthetic equity instruments include phantom stock, stock appreciation rights (SARs), and profit interests in LLCs—each with unique tax implications that require expensive lawyers to explain.
Source: Corporate compensation and financial engineering terminology
Related Terms
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See “synthetic equity” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.
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