Benefits of backdating stock options

That is, they grant their executives stock options with an exercise price (or price at which the employee can purchase the common stock at a later date) equivalent to the market price at the time of the option grant.

Because the option value is higher if the exercise price is lower, executives prefer to be granted options when the stock price is at its lowest.This means they must wait for the stock to appreciate before making any money.(For more insight, see ) Although it may appear shady, public companies can typically issue and price stock option grants as they see fit, but this will all depend on the terms and conditions of their stock option granting program.Companies would simply wait for a period in which the company's stock price fell to a low and then moved higher within a two-month period.The company would then grant the option but date it at or near its lowest point.

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