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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (1094)	1/2/1999 11:05:00 PM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

Options Bonanza for ETrade Employees "Online Broker Shifts Employee Options Plan" By BLOOMBERG NEWS ALO ALTO, Calif. -- ETrade Group Inc., the No. 2 online broker, reduced the exercise price on employee stock options two weeks after its stock traded at a 21-month low and began a three-month surge that increased its price sixfold. On Oct. 22, the company told employees they could trade in options carrying higher exercise prices for new ones at that day's closing price of $17, according to the company's annual report, filed this week with the Securities and Exchange Commission. The company said options covering almost 3.5 million shares have since been "regranted" under the program. ETrade rose to a record $60.125 a share on Tuesday from an intraday low of $10 on Oct. 8. On Wednesday, the stock fell $9.3125, or 15 percent, to $50.8125, after dropping as low as $48. Employees who took advantage of the lower-priced options had total paper gains of $117.7 million at Wednesday's close. More than two-thirds of ETrade's 700 employees are eligible for stock options, which vest at a rate of 25 percent a year. Employees who traded in their old options "start from ground zero, as if it was day one of the vesting period," said a company spokeswoman, Lisa Nash. "This decision was certainly not taken lightly." The company did not specify the exercise price on options that were traded in by employees. According to its January 1998 proxy statement, the company's president, Christos Cotsakos, and four other senior executives received about 550,000 options at an average exercise price of $27.42 in July and August 1997. Companies with volatile stocks should not reprice options when their share prices dip, said Graef Crystal, an executive compensation consultant. Doing so, he said, creates "a virtual money machine, an antigravity device." On Oct. 8, two weeks before the options-adjustment program was instituted, shares of ETrade and other online brokers, like the Charles Schwab Corporation and the Ameritrade Holding Corporation, closed at 52-week lows on concerns that the bull market in stocks would end because of economic crises in Russia, Japan and emerging markets. Before Wednesday's decline, ETrade shares rose for eight straight days on optimism about the company's financial results for the current quarter. Industry executives and analysts say online brokers' trading volume rose by more than one-third, largely because of heavy activity in Internet stocks. In its annual report filing, the company, based in Palo Alto, also disclosed that it had invested $2 million in KAP Group, a company led by the founder and chairman of ETrade, William Porter. That company is trying to establish an online options exchange. ETrade invested another $15.3 million for a less than 20 percent stake in Critical Path, a provider of e-mail software to large Web sites. ETrade Group owns 42 percent of ETrade Japan, its joint online trading venture with the Softbank Corporation, after making an $8 million investment, according to the filing.