Share Option Scheme

J_Devon

Apologies if this should be in the Employment section, I couldn't decide which it came under.

I have access to a Share Option Scheme at work with the First Exercise Date being 27th Feb '09 and an Exercise Share Price of £1.20 per share. We have the option of buying 1200 shares at that price.

The questions are probably quite simple, but I have no idea...

1. By saying "First" Exercise date, does this mean that this is the first date that the shares can be purchased at that price? How long is the option normally open for? (I'm unable to find it in the paperwork).

2. Currently the shares on the open market are approximately 15p per share less than the Exercise price of £1.20 per share.

What happens in this situation?
Are the company likely to reduce the Exercise price to account for the open market price? (The price of £1.20 was set in a time when the shares were £3.20 per share).
It would seem at anyone with any sense would not buy these shares through the scheme when they are available at a lower cost through the open market. If however the "option" is open for a number of years, then you could obviously just wait until the market eventually recovers and purchase them then?

Any help would be much appreciated as we've been discussing this in the office and no-one seems to have any idea of the answer.

Thanks
J

Lorian

IME The documentation should tell you the window when you can exercise the option (On my scheme its 6 months IIRC). If during that window the option price is always at or above the market price then you should have an option just to get the cashback without exercising the option.

Guess its a bad time to have options in such schemes. Still you shouldnt loose the money you paid in, maybe there was a % incentive too.

IANAFA.

J_Devon

Thanks for your reply Lorian

We haven't had to pay any money yet which is why we were all questioning what would happen. The company may have budgeted for xx% of its employee's to buy these shares and could have budgeted for a big injection of funds into the firm. With this in mind we were wondering if they would be pressured to drop the price?

I'll double check the paperwork again to try and find out how long the option is there for.

turbobob

Ignore, I read your post wrongly!

J_Devon

lol, okay. I didn't see your original post but thanks.

I'm going to look through the paperwork in more detail in the office tomorrow morning and see if it tells us anything about the duration of the option.

In the mean time, any thoughts on how they may address this situation are much appreciated

J

Lorian

sounds like a smaller (not tax exempt?) scheme, unlike what I'm used to. Im used to a scheme where you are given an option price and pay a fixed amount every month for so many years and then have the option to buy.

I doubt they will do anything to drop the option price, as that would cost money.

J_Devon

Hi, there was also a scheme running in parallel to the one I've talked about which works as you have said.

Yes, I did wonder if there were perhaps legal issues with dropping the price?