Friday, June 19, 2009

Stock Option Exchange Programs

Stock Option Exchange Programs (a.k.a. "repricings") on the Rise

From "A quick scan of Edgar shows that the pace of companies offering stock option exchange programs seems to be accelerating. We counted over 80 filings that mentioned stock option exchange programs in June 2009, compared to just 11 filings in 2008. Granted, many of those are multiple filings for the same company. Still, it’s hard to ignore the fact that option exchange programs seem to have really taken off lately."

Note on Legal and 409A Issues

From JP Morgan: "The final regulations indicate that such a re-pricing not below the fair market value of the stock on the date of the re-pricing will not, by itself, cause the program to be subject to 409A. Instead, it is treated as a new award exempt from 409A."

Primer on 409A Valuation Methodologies and FAS 157

Good information on valuation techniques from Axiom Valuation