Shadow stock


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Shadow stock

First, a public company may create a stock that strips out the market wide movements for the purpose of rewarding managers. That is, the management might have done a great job - but the traded stock plummets because the market as a whole plummets. A second interpretation of shadow stock is a phantom stock that is created by a private company (i.e. that does not have stock traded either on exchange or over the counter) again for the purpose of performance evaluation and rewards.

Shadow Stock

A term used to describe the stock of a publicly-traded company that has already been listed on an exchange after the listing of a new company in the same or a similar industry. For example, stock in an already established oil company is a shadow stock to that of a newly listed oil company. When a new company is listed on an exchange, its share price tends to increase rapidly. This often causes shadow stocks to increase as well. However, the increase in the shadow stock's price is not sustainable, as it is unrelated to its actual performance, and it tends to drop soon after.
References in periodicals archive ?
What to call the American Association of Individual Investors (AAII) shadow stock portfolio?
They are also referred to as "shadow stock plans" or "as if" deferred compensation (i.e., the amount deferred is treated as if invested in the employer's stock).
"The South Florida markets will take the brunt of the slowdown given its large shadow stock of condos-for-rent, re-conversions and the potential for selective repurposing of condo projects that will ultimately come to market as competitive multifamily housing."
A new plan was substituted that provided for shadow stock to participants, which had to be surrendered to obtain, at the participant's election, a lumpsum or installment payments.
The court found that constructive receipt did not occur, because a participant had to give up shadow stock to receive payments.
Shadow stock of the employer corporation is often used as an investment vehicle to provide an employee with the financial benefits of ownership without actual ownership.
In a recent case of first impression, the Tax Court has determined that employees did not "constructively receive" shadow stock benefits either at the time a lump-sum option became available or at the time they elected to receive installments.
In 1981, the company adopted a new shadow stock deferred benefits plan.
In siding with the taxpayers, the court cited IRS Regulations and found that despite the fact that the benefits were available, they were not yet "credited, set apart or made available in such a way that the taxpayers could have drawn on the funds." Substantial limitations and restrictions remained at the time the new plan was initiated including the fact that the participants could obtain payment of their benefits only by forfeiting the right to receive future contributions of shadow stock, the right to participate in the company's future equity growth without risking actual capital and the right to future payment based upon common stock dividends.