Settlement is the final stage of a forward contract. On the agreed date, or at a time chosen by one party within a window, the contract is completed. In a physical settlement, the seller delivers the shares or asset and the buyer pays the agreed price. In a cash settlement, only the difference between the contract price and the market value is paid. In a net share settlement, the difference is paid in shares.
The method matters for the company and its investors. Physical settlement of a forward equity sale brings cash into the company and increases the share count. Cash or net share settlement may not raise any money, and the effect on shares outstanding differs.
The price at settlement is often adjusted from the original forward price for factors such as interest costs and dividends paid in the meantime.
Check which settlement methods are allowed, who has the choice, the deadline and how each method would change cash and the number of shares.