Carrot Equity

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Carrot equity

British slang for an equity investment with the added benefit of an opportunity to purchase more equity if the company reaches certain financial goals.

Carrot Equity

The right of a shareholder to purchase more shares in a publicly-traded company if the company's performance reaches a certain benchmark. If the company's performance outpaces expectations or reaches a stated level (for example, if its net income or operating income reaches a certain amount) the holders of carrot equity may purchase more shares. Carrot equity operates much like a call option, but it is given automatically and the shareholder need not buy it. Carrot equity is designed to give shareholders a vested interest in the company's medium or long-term performance.

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