As tech stocks plummet, more Silicon Valley workers find themselves holding worthless options — the kind that would allow them to buy company stock at higher prices than they are currently being publicly traded.
As of October 24, more than 80% of Silicon Valley’s 150 largest publicly traded companies have employees holding underwater options, according to executive compensation research firm Equilar. CEOs at 90% of those companies also held options worth less than their strike price.
At Google, fully a third of the company’s 20,000 employees hold underwater options. Last month, Google (GOOG) sought to soothe anxious employees with an internal employee-compensation presentation, reminding them that their Transferable Stock Options are worth more than regular options.
One Yahoo exec told the Wall Street Journal: “Anyone who’s been hired after I was hired, all those people are underwater.” Chipmaker AMD (AMD) plans to ask shareholders permission to lower the strike price 99% of its outstanding options.
When stock prices drop, investors typically balk at allowing companies to reprice employee options. But in the Valley, options are an elemental part of employee compensation. And investors sound amenable, according to the Journal:
RiskMetrics’ Mr. McGurn said investors will be much more sympathetic to plans that don’t include executives and directors, many of whom are seen as overpaid. Shareholders also may want to see vesting schedules, the length of time employees have to work at a company before getting their grants, extended in order to entice employees to stay longer.
“I would probably lean toward [repricing] if it would help keep employees,” said Ryan Jacob, chief investment officer at Jacob Asset Management, which holds shares in many major technology companies, including Google, Apple (AAPL) and Yahoo (YHOO).
Photo: Alex Campos
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