Calculating Phantom Plan portfolio value

Introduction

This guide explains how to determine a participant's portfolio value in a phantom plan within the Eldison platform, including the bonus calculation upon an Exit Event, with a simplified example.

Calculation from the plan terms

The bonus formula is:

Bonus = F × (VPS / TPS) − IV

Variable definitions:

• Bonus: The monetary or in-kind amount paid to eligible participants, subject to deductions.
• F (Fund): Total consideration shareholders receive for shares dedicated to the plan during the Exit Event.
• VPS (Vested Phantom Shares): Participant's vested phantom shares at the Exit Event.
• TPS (Total Phantom Shares): Total phantom shares in the plan at the Exit Event.
• IV (Initial Value): Starting value of the participant's vested phantom shares when granted.

Initial Value (IV)

The IV represents the baseline value of vested phantom shares at grant time, serving three purposes:

• Baseline for growth: Measures share value appreciation over time.
• Fair comparison: Ensures accurate assessment between initial and current value.
• Motivation: Shows participants their share growth potential.

Example calculation

John Doe's scenario:

• F: $4,000,000 (derived from $50M company value × 8% pool)
• VPS: 20,000 shares
• TPS: 1,000,000 shares
• IV: $22,000 (20,000 shares × $1.10)

Result: Bonus = $4,000,000 × (20,000 ÷ 1,000,000) − $22,000 = $58,000

Interpreting results

• During cliff: With zero vested shares, portfolio value shows $0.
• After cliff: Value increases as shares vest.
• Valuation scenarios: Portfolio growth depends on company valuation exceeding the Initial Value.

How the graph works

Formula: Portfolio Value = Vested Shares × (Asset Value − Initial Value)

The graph reflects only vested shares (unvested shares excluded), growth as shares vest and valuation increases, and $0 values when valuation remains below Initial Value.

Why portfolio value might be $0

Cliff periods: Vested Phantom Shares equals zero during cliff periods, resulting in zero portfolio value.

Initial value impact: A high Initial Value relative to valuation scenarios may show lower early growth, as bonuses reward appreciation above the baseline.

Conclusion

This calculation framework enables transparent ESOP management. Contact Eldison Support for specific inquiries.