Equity management: Your Ultimate Guide

Equity Management

Equity management: Your Ultimate Guide

So you've worked hard, invested wisely, and built up an equity portfolio. Now the real challenge begins - managing it. Equity management is an art form, requiring discipline, patience, and the right strategy tailored to your goals. This guide will walk you through a practical approach to overseeing your equity investments and keeping your portfolio on track. We'll explore how to monitor your holdings, when to buy and sell, strategies for diversification, and ways to minimize risk. You'll learn tips for staying invested for the long haul and making adjustments when needed to optimize your returns. Successful equity management is within your reach if you establish a plan and stick to it. Read on to gain the knowledge and tools you need to maintain a healthy, balanced portfolio for years to come.

What Is Equity Management?

Equity management refers to the process of optimizing the value of a company's shares. As an equity manager, your goal is to analyze the business and the market to determine how to best allocate resources to increase shareholder value.

What equity managers do

Equity managers typically:

  • Monitor the company's financial performance and share price
  • Assess the competitive landscape and industry trends
  • Determine growth opportunities and new markets to target
  • Allocate capital to high-potential projects and acquisitions
  • Make decisions around issuing dividends or buying back shares

The ultimate aim is to guide strategic decisions that will boost the company's stock performance and investor returns over the long run. Equity management requires a careful balancing act - taking a short-term view to keep shareholders happy while also thinking long-term about what will drive sustainable growth.

With the right expertise and oversight, equity management can help companies reach their full potential and shareholders achieve solid returns on their investment. When done well, it's a win-win for all parties involved.

What is equity administration?

Equity administration refers to managing all the moving parts related to employee stock options and equity compensation. This includes:

  • Cap table management: Tracking all the shares, options, warrants, and other securities issued by a company to properly allocate ownership.
  • 409A valuations: Calculating the fair market value of your company’s common stock for tax and accounting purposes. These need to be done annually by an independent third-party.
  • Maintaining compliance: Ensuring all equity grants, exercises, and other events comply with applicable laws and the terms of your equity incentive plans. This also includes SEC filing requirements for public companies.
  • Accounting: Properly recording equity transactions in your books and assigning costs to them for tax and audit purposes.
  • Additional compliance checks: Verifying eligibility, vesting schedules, blackout periods, and other requirements are satisfied before allowing equity events to proceed.

In short, equity administration encompasses all the legal, tax, compliance and operational responsibilities that come with having outside shareholders and providing equity compensation. For most companies, it’s a complex process that requires significant time and resources to do right. Equity administration platforms and services have emerged to help automate and simplify these efforts so you can focus on growing your business.

Whose equity do you need to manage?

When it comes to managing equity, you’ll need to balance the needs and interests of two key groups: investors and employees.

Investor stakeholders

Investors provide the capital that allows your company to operate and grow. To attract and retain investors, you must demonstrate that their equity shares will appreciate in value over time through company growth and profitability. Focus on maximizing returns and minimizing risks for your investors.

Employee stakeholders

Employees, especially key executives and top talent, rely on equity compensation as an incentive and reward for their work and loyalty. Equity programs that vest over time, through performance milestones, help attract and retain the best employees. Make sure your equity management plan motivates and rewards employees appropriately based on their contributions.

Balancing these interests may require trade-offs at times, but with open communication and fair practices, you can develop an equity management strategy that benefits both investor and employee stakeholders in the long run. Keeping all parties satisfied will put your company in the strongest position possible for success.

Liquidity events and equity management

When equity has been distributed among team members, a liquidity event allows everyone to cash out. As an equity holder, there are a few things to keep in mind to make the most of this opportunity.

Tax implications

The way in which equity is distributed can significantly impact the taxes owed. Consider the tax treatment of stock options, restricted stock units (RSUs), and direct stock awards. You’ll want to evaluate the tax burden for each type to determine the most tax-efficient option. It may also be worth consulting a tax professional to make sure you fully understand your obligations.


Deciding when to sell your equity shares is crucial. If the company’s growth trajectory is still on the rise, holding onto shares for longer may allow for a higher valuation and bigger payout. However, there is also risk that the stock price could drop significantly if growth slows or the company runs into challenges. Determining the optimal time to sell requires balancing these risks and rewards based on your own financial situation and risk tolerance.


After a liquidity event, it’s important to diversify your investments to avoid having the majority of your net worth tied to a single company’s stock. Work with a financial advisor to develop an investment strategy that aligns with your financial goals and risk profile. Diversifying into other asset classes like real estate, bonds, and broad market index funds can help ensure your money is working for you even if the company’s stock value declines.

A liquidity event is a crucial milestone, so make sure to go in with eyes wide open. Carefully evaluating your options, understanding the tax implications, timing your equity sales strategically, and diversifying your investments afterwards will set you up for financial success.

What is Equity in a business? Why is it important?

Equity represents the value of a business. It refers to the amount of money invested in a company by its owners and shareholders. Equity is important because it provides working capital and collateral for the business.

As an owner, your equity in the business represents your share of the total value. The more equity you have, the more control and claim you have to the business's assets and profits. Equity allows you to get loans and lines of credit for your company by using it as collateral. It gives you more flexibility and stability in the long run.

Maintaining and building your equity should be a top priority. You can increase equity by:

  • Retaining profits rather than distributing dividends
  • Issuing new shares
  • Getting investments from shareholders
  • Increasing the value of assets

Equity provides security and opportunities for growth. Monitor it regularly and make strategic decisions to strengthen your business's financial position.

What is shareholder Equity?

As a board member, it's important to understand shareholder's equity and how it relates to your company’s financial position.

Shareholders’ equity refers to the amount of money invested in a company by its shareholders. It's calculated by subtracting a company’s total liabilities from its total assets. In other words, it's the net worth of a company and represents the amount that would be returned to shareholders if all assets were liquidated and all debts repaid.

Monitoring shareholders’ equity is key to ensuring the financial health and stability of your organization. A company with high shareholders’ equity relative to total assets is generally in a stable financial position. If equity is declining, it could signal underlying financial difficulties and require corrective actions by the board such as reducing liabilities, increasing revenue and profits, or attracting new investments.

As a board member, keeping a close eye on shareholders’ equity and the factors influencing it should be an integral part of your fiduciary responsibilities. Making well-informed decisions to strengthen your company’s financial foundation will help pave the way for future growth and success.

Types of Equity

There are two main types of equity in a company - common shares and preferred shares.

Common shares, also known as common stock, represent ownership in a company and entitle shareholders to voting rights and dividends. However, dividends are not guaranteed and are issued at the discretion of the board of directors. Shareholders' claims on assets and earnings are subordinate to the claims of bondholders and preferred shareholders.

Preferred shares, or preferred stock, also represent ownership in a company but have priority over common shares for dividend payments and asset distribution. Preferred shareholders typically do not have voting rights but receive fixed dividend payments. In the event of liquidation, preferred shareholders are paid out before common shareholders.

While common and preferred shares make up the majority of a company's equity, other types exist like tracking stock, restricted stock, employee stock options, and treasury stock. Managing a company's equity structure requires ongoing review to optimize the balance of risk, control, and financing costs.

Equity Management in Secondary Market

Once a company goes public, it enters the secondary market where its shares are traded between investors. Effective equity management in the secondary market involves several key steps:

Monitoring Stock Performance

Regularly check how your company's stock is performing in the market. Track metrics like share price, trading volume, and market capitalization. Look for any significant changes that could impact current or potential shareholders. Stay on top of factors influencing the stock price and address issues promptly.

Maintaining good investor relations is also crucial. Communicate openly with analysts and shareholders, providing transparent and timely information about your company's progress and future outlook. Host quarterly earnings calls and investor events to connect directly with the investment community. Strong investor relations help stabilize stock price and build confidence in the company.

Implementing Defense Strategies

Be prepared to defend against threats to shareholder value like hostile takeovers, activist investors, and short sellers. Have a defense strategy in place for different scenarios, including a "poison pill" to prevent hostile takeovers or share buybacks to counter short selling. Work closely with your Board of Directors to determine appropriate defensive actions that align with the best interests of long-term shareholders.

Equity management is an ongoing effort to maximize shareholder value over the long run. With diligent monitoring, proactive investor relations, and strategic defense mechanisms, companies can maintain a stable stock price and a loyal shareholder base.

Equity Management Software

Equity management software is designed to help you efficiently manage your investment portfolio. These tools can track your positions, monitor performance, rebalance holdings and minimize taxes. Many brokerages offer basic equity management tools, but you may want to consider third-party software for more robust features.

Popular options for DIY investors include Personal Capital, SigFig and Morningstar. These platforms let you aggregate all your investment accounts in one place so you can see your entire portfolio at a glance. They provide an overview of how your investments are allocated across asset classes like stocks, bonds, cash and alternatives. You can also get reports on gains, losses, fees and benchmarks to evaluate performance.

If simplifying your equity management is a priority, Equity Management tools like WOWS Cap Table is an option.

In the end, the best equity management software for you depends on your needs, technical skills and how much control you want over your investments. Review a few options to find one that suits your style. With the right tools, you can gain valuable insight into your portfolio and make sure your equity exposure is optimized.

Why Use Equity Management Software?

Equity management software offers several benefits for companies looking to optimize their equity programs.


Equity management software can automate many of the repetitive, time-consuming tasks involved in managing equity, like calculating vesting schedules, modeling the impact of corporate events on equity values, and generating legal documents. This frees up time for strategic work.

Reporting and Insights

With customized reporting and dashboard features, equity management software provides visibility into key metrics and insights that help guide decision making. You'll have an at-a-glance view of equity program health, participation rates, and more.


As companies grow, equity programs become increasingly complex to manage manually. Equity management software is built to handle the nuances and scale of mature equity programs with many types of equity grants, grantees, and corporate events.

Reduced Risk

Software minimizes the risk of errors in equity value calculations, vesting and expiration schedules, and legal documents. It also provides an auditable record of all equity grants, vesting activity, and other events—critical for compliance.

Cost Savings

Although equity management software represents an investment, it can drive significant cost savings over manual processes or spreadsheet-based systems. The soft costs of reduced risk, improved efficiency, and better strategic decision making also add to the ROI.

For companies offering equity compensation, software is really the only way to effectively manage the end-to-end process in today’s environment. While spreadsheets and manual processes may have sufficed in the past, they simply can’t keep up as equity programs become more sophisticated. Equity management software is the practical solution for gaining control, maximizing value, and ensuring compliance.

How WOWS Global helps?

WOWS Global, an equity management platform, helps in the following ways:

  • Provides customized equity plans: WOWS Global develops tailored equity compensation plans based on a company’s business goals, budget, and talent retention needs. They consider factors like job levels, performance, potential, and risk of attrition.
  • Automates plan administration: The platform streamlines processes like grant approvals, vesting and exercising of equity, and cap table management. This reduces the administrative burden on HR teams and finance departments.
  • Improves employee experience: With user-friendly portals, employees get a clear view of their equity grants, vesting schedules, and values. They can explore different exercise strategies and see the tax implications, improving their understanding and experience.
  • Benchmarks against the market: WOWS Global leverages data from thousands of private companies to benchmark equity compensation. Companies can see how their plans compare to peers and make adjustments to stay competitive.
  • Provides key insights: Companies get analytics and reports on key metrics like burn rate, dilution, and value accrued to employees. These insights help shape strategy and ensure equity plans are aligned with business goals.
  • Optimizes tax efficiency: The platform helps minimize taxes like ASC 718 expenses and maximizes tax deductions. Strategies are customized based on a company’s tax situation and accounting methods.
  • Manages cap table: WOWS Global maintains an up-to-date cap table, tracking all equity issuances, exercises, expirations, and other changes. The cap table provides an auditable record of ownership at any point in time.


You now have a complete overview of the key aspects of equity management. The process requires diligence, organization, and a willingness to make difficult decisions to ensure fairness and optimal outcomes. But with the right mindset and tools, you can develop and implement an effective equity management strategy. Start by evaluating where you are today and defining where you want to go. Then determine how you'll get there through policy development, communication, education, and ongoing monitoring. Equity should be an organizational priority that is woven into everyday practices and decision making. Though the work is challenging, the rewards of a truly equitable and just system are well worth the effort. You have the power to make a difference - now go out there and get started!

Related Posts