Basics: Underwater Options
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Articles (Jump to FAQs)
Joanna Glasner and Bruce Brumberg
Don't be discouraged by stock market volatility and underwater stock options. As the experts note, stock grants are tools for building wealth in the long term.
Loren Rodgers
You feel let down by your stock options. Your company's stock price has dropped, leaving you with underwater options, and the cash flow from expected option riches has evaporated.
W.E.B. Bantling
Market declines rattle even the most experienced option veterans (and advisors too). If you are less than fully prepared to cope with the emotional toll caused by an uncertain market, heed these ten topics.
Jeff Nash
Financial Week, 2/18/08
Repricing underwater stock options seems a good idea when many executives and employees are stuck with worthless options after a company's stock price falls. However, getting shareholders to approve the repricing is easier said than done. This article explores "shareholder-friendly" ways to present the subject of repricing.
Paul Sweeney
Journal of Accountancy, 10/01
The use of stock options as the ideal form of employee compensation has lost some of its luster. Companies scramble to remedy their underwater long-term incentive plans. Strategies include repricing, exchanges, and issuing restricted stock.
Lisa Meyer
Red Herring, 4/3/01
Does all this repricing of stock options and rescinding of executive stock purchases remind you of do-overs in gym class? It seems that the only ones living with a company's bad investment decisions are those who aren't pulling a paycheck from the company. (Registration is required.)
Andrew Osterland
CFO.com, 3/1/01
To prevent turnover and retain stock options' incentive value, companies are approaching underwater options in a variety of ways.
Scarlett Pruitt
InfoWorld.com, 4/18/01
Companies are increasingly turning to an option reissue program commonly referred to as "six-and-one." Under this type of plan, companies can cancel options and reissue them, no sooner than six months and one day later, according to accounting laws.
Joanna Glasner
WIRED News, 4/3/01
Technology companies -- which richly rewarded employees with stock options in 1999 and 2000 -- are now finding themselves in a bind. A huge portion of the options they doled out over the last few years are now underwater, meaning they're worth less than the current trading price of the stock. As a result, companies are under pressure to grant new stock options to keep the employees they're not laying off from jumping ship.
Craig Schneider
CFO.com, 11/08/00
Has volatility in internet and technology stocks soured employees on stock options? Surprisingly, no.
Kathleen Pender
San Francisco Chronicle, 4/28/00
Companies get cautious about hyping stock options. Some companies will not hire you if you bring up options too early in the interview process.
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FAQs (Jump to articles)
Underwater options have an exercise price greater than the market price of the stock. For example...
No. You do not want to exercise underwater stock options. You can buy the stock for less in the open market...
According to a study by Steven Hall & Partners, stock options were underwater at 34% of the companies in the Fortune 500 on February 8, 2008. In the past, approaches have included...
No. When your exercise price (e.g., $10) is higher than the...
Wishful thinking! Just as you are not taxed on the value of the options at grant, you may not write off any expired unexercised options, whether underwater or in the money...
This is wishful thinking, because these are two separate transactions. It does not make sense to...
Generally, the exercise price cannot be raised without your written consent...
An option exchange is an alternative to repricing underwater stock options...
Very few companies arrange a straight repricing of outstanding options. Companies concerned about widespread and deeply underwater options may offer an...
You recognize ordinary income for the full value of the cash payment. Any deferred portion of the cash sale proceeds is not taxable until...
According to a statement the company issued on December 11, 2003...
In an M&A deal, the buyer can assume or convert just the valuable stock options and cash out the underwater options or let them...
This depends on whether the ISOs are already vested. According to the final IRS regulations on ISOs...
An option-for-option exchange is not taxable. But when you exchange underwater options for restricted stock...
In a public company you would never exercise underwater stock options. In a private company...
When the net intrinsic value of the stock is zero, the attorney for the nonemployee-spouse has two ways to obtain...
When options are exercised, generally the estate or beneficiary is able to take an income tax deduction for the amount of estate taxes already paid by the estate. But when they are not exercised you cannot take the deduction against other income...
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