Final answer:
Forfeiture of restricted stock occurs when an employee loses ownership rights to their granted stock by failing to meet certain conditions, such as remaining employed for a specific period or meeting performance targets, leading to the stocks returning to the company.
Step-by-step explanation:
When discussing what forfeiture of restricted stock looks like, it involves a situation where an employee loses the rights to their restricted stock due to failing to meet certain conditions outlined in the stock grant agreement. These conditions often relate to employment duration or performance targets. If an employee leaves the company before these conditions are met, typically, the unvested restricted stock is forfeited. This means the individual no longer has any ownership rights to the stocks, and they are returned to the company. Forfeiture is designed to incentivize employees to remain with the company and achieve performance goals.