Several of us were talking about this at work today (since all major companies will likely do something with their out-of-the-money options, including ours). After some deeper thought, we were split, actually, on if we would take NVDA's deal were it offered to us.
NVDA gives $3.20 for 27+ vested options. 27 is about 3X the current price. Note that NVDA has risen quite quickly, so options priced at $27+ weren't granted until until after Q1'00. Don't know how their vesting schedule goes, but I can't image they have vested a substantial percentage of those grants by now.
Regardless, let's say you have options on NVDA priced at 35. Do you give them up for $3.20 each? Well, since they must have been granted since Q1'00, that means they they expire in Q1'10 or later (i.e. ten year from grant to expiration). So what is the time premium for an eight (or more) year LEAP? Probably more than $3.20 on a Jan '10 $27.50 (if it existed). So if you were an NVDA employee (with some time-premium savvy), it would probably be worth sitting down and calculating if it really IS worth cashing out options below, say, $35-40. If you have options at $50, though, it becomes less difficult to take the money!
Anyway, I don't think it is as much of a handout as it initially appeared.
Steve |
