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August 29, 2008

Wave of Option Repricing Coming?

Employee stock options at 1 in 10 Fortune 500 companies are essentially worthless, and stock options are currently underwater at 40% such companies. That is up from a little over 30% being underwater at the end of Q1, according to a new study.

Some more specifics:

• Five of the ten most underwater companies are in financial services
• Freddie Mac has the most deeply underwater options, with 90% below its weighted average share price of August 15th. Fannie Mae and WaMu aren’t far behind.
• VMware is already trying to get shareholder approval to reprice employee options.

Is a wave of option repricing looming? You have to imagine it’s up there as an issue, but a weak employment market is likely taking some of the pressure off job-hopping option-seekers.

[via FinancialWeek]

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