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Technology Stocks : Intel Corporation (INTC)
INTC 34.32-1.2%Nov 18 3:59 PM EST
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To: Paul Fiondella who wrote (76191)3/11/1999 5:35:00 PM
From: Amy J  Read Replies (3) of 186894
 
Re: "All companies grant options at fair market price?
No some options are granted at a fixed price. I know of one CEO who got his one million shares for 1 cent each when the stock was selling for 9 dollars."

It's illegal to grant stock at:

1- different prices to different investors at the same time

2- anything other than fair market price

The board of directors has a fiduciary responsibility to its shareholders to act in the best interests of the investors and to be legally responsible. Board member names are given to the state government when a business is corporated.

The executive you mentioned received his stock at par value of a penny because he was either one of the founders or one of the early employees who received stock at founder value (i.e. almost valueless stock at this early stage.) This was the fair market value, set by the board, and was his grant price. He executed the stock years later.

In a private company, the stock price is negotiated with investors on company valuation. But the board sets it and it can't be different for different investors at the same time. And if the price is set too high, the company doesn't gain any investment money. Before Angel/VC funding (i.e. before the valuation of IP happens), very early stage companies can be corporated at a valuation which is usually just: paid-in-capital + assets + labor into IP, so the price/share on founder common stock is simply this number, divided by # of outstanding issued common stock.

Amy J
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