Google Reprices Employee Stock Options; Analyst Questions Timing - 8 Mar 2009
Google Reprices Employee Stock Options; Analyst Questions Timing
by Laurie Sullivan
Google closed the deal on a reprice stock
program today at 6 a.m. that allowed employees to exchange options when
their price is higher than $308.57, Friday's closing price and the new
strike price for exchanged options.
The repricing program, which began Feb. 3, has a new retention clause,
too. The options will have a vesting schedule that adds 12 months to
the original vesting timetable. New options will vest no sooner than
six months after the close of the offer period. Experts believe that
when companies reprice options to retain and motivate top employees,
shareholders benefit in the long run, too.
But while Google views the program as an incentive to hold on to top
employees, many shareholders don't see it that way, according to Global
Equities Research Analyst Trip Chowdhry.
In a research note published Friday, Chowdhry warned investors of the
possibility that Google's "management is manipulating" the stock price
to give employees better repricing options. He claims that Google's
executives "kept quiet," so management could continue to sell their
stock under the U.S. Securities and Exchange Commission (SEC) 144
guidelines.
"Google is not taking shareholders into consideration," Chowdhry told Online Media Daily.
In the research note, he questions the timing of recent statements and
stock sales by Google executives, as well as comments made by CEO Eric
Schmidt during an interview last week with CNBC's Bill Griffeth.
"The timing of Eric Schmidt's negative comments and the option
repricing for employees, etc., are too coincidental," Chowdhry wrote to
investors. "However, you can make your own judgment. We just don't feel
comfortable with what we observe."
Google Spokeswoman Jane Penner called the allegations "absurd" and said
anyone following Google's business for the last few months knows
executives have consistently admitted that the economy is bad and no
company is immune from the recession. "At our quarterly earnings call
in October we talked about Google being in uncharted territory," she
said. "In January, we described the fourth quarter as the easy part. We
said nothing different last week."
While Google doesn't provide guidance, executives have publicly stated
the company's position during the last several quarters. For instance,
Patrick Pichette told Bloomberg News after the release of the
third-quarter earnings: "We are realistic about the poor state of the
global economy, but it's Google, so we'll manage accordingly," In the
same article, Sergey Brin notes: "We don't know exactly what the future
holds. We've taken a conservative approach.'"
more...http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=101758
Here's a secondary article on Google's repricing...http://www.realclearmarkets.com/news/ap/finance_business/2009/Mar/06/stock_market_slump_could_enrich_google_workers.html
March 06, 2009
Stock market slump could enrich Google workers
Michael Liedtke
As
Google Inc.'s stock price plunged along with the rest of the market
this week, the Internet search leader's employees were set up for a
bigger windfall down the road.
The
market turmoil yielded a moneymaking opportunity for about 17,000 of
Google's workers because of a program that's supposed to help them
forget about the nearly 60 percent drop in the company's stock price
since a peak of $747 in November 2007.
To boost morale and retain
workers, Google is giving them a second chance to profit from millions
of stock options that were doled out in better times. The value of
those options has crumbled as the economy has plunged into its worst
recession since the early 1980s, leaving the stock market in shambles.
Google
is trying to erase those losses by offering to reset the exercise price
on most of its outstanding stock options. The new exercise price, which
is an employee's cost for redeeming the option, will mirror Friday's
closing price of $308.57 for Google's stock.
Employees profit
from options by cashing in on the difference between the exercise price
and a stock's market price. So Google's workers had an incentive this
week to root for the company's shares to decline, lowering their
exercise price and boosting the potential payout they could reap later.
Google's shares edged up $2.93, nearly 1 percent, Friday but still fell nearly $30, or about 9 percent, for the entire week.
About
85 percent of Google's 20,000 employees hold options that are "under
water," meaning the stock's trading price is below the exercise price.
The
vast majority of those options are expected to be exchanged for rewards
at the new exercise price before the exchange program expires at 6 a.m.
Pacific time Monday. Google Chief Executive Eric Schmidt and
co-founders Larry Page and Sergey Brin — all billionaires already
anyway — are the only employees who can't take advantage of the offer.
http://www.ebusinesspractices.com/2009/03/so-how-many-googlers-swapped-their-options/
So how many Googlers swapped their options?
March 9th, 2009 Michelle Leder Posted in Uncategorized |
here, Googlers got several reminders that the deadline was approaching
and lots of helpful information — slideshows, videos, and several email
reminders, including one from CEO Eric Schmidt reminding employees not
to wait until the last minute to take advantage of the option exchange.
The new options were priced at Friday’s close of $308 and this
morning the stock is trading just under $300, so already those new
options are underwater. Late Friday, Google filed this amendment to its offering documents — its’ seventh since the program was announced back in late January. Employees who opted to exchange their options received this confirmation according to the late Friday filing.
So how many employees wound up exchanging their options? It’s
probably not a material disclosure given Google’s size, but it will be
interesting to see whether the company does choose to disclose this. In
earlier filings, the company estimated that roughly 85% of all
employees held underwater options.
UPDATE: That didn’t take long. With Google closing at $290.89 today, those newly repriced options are already $18 underwater.
Image source: Paul Sakuma/Associated Press