Googlers kiss underwater stock options goodbye

March 7, 2009

No one likes to see their company’s stock drop. But employees and executives at Google were probably not overly distraught to see their stock close Friday at $308.57, down 19 percent since Feb. 9.

That’s because Friday’s close is the price that Google will use to reset employee stock options, according to the terms of its controversial option exchange program. Google announced the plan in January, explaining that 85 percent of its workers’ stock options were underwater, meaning that the price to exercise the option was below the current market price -– a fact which isn’t too surprising, given that Google’s stock peaked at $747.24 in November 2007.

Google is among several companies, including Starbucks and Advanced Micro Devices, that are repricing stock options in order to keep morale in the ranks up and to retain talent that might otherwise be lured by greener pastures. Of course, investors, who don’t enjoy the benefit of repricing the shares they purchased, are less fond of such option exchange programs. And the $400 million charge that Google estimates will be incurred as a result of its option exchange is further salt in the wounds to shareholders.

The decline in Google’s stock during the past month is in line with that of the broader market: the Nasdaq is also down 19 percent since Feb. 9. Yahoo, the No.2 search firm in the U.S., is down only 6.7 percent during the period.

If Google’s stock begins to rise from here on out, employees will be sitting pretty. But even CEO Eric Schmidt does not seem to believe that the economic slowdown has reached its bottom yet.

(Photo: Reuters)


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I know investors may not be very happy with it, but you can’t make money without the minds that make the company work. This option exchange helps keep the minds working for Google.

Posted by Brian | Report as abusive

Keep the minds working for Google? Where else are they going to work? Its not like there many (if any) other companies that are offering what Google offers to smart, creative people. A move like this will undermine the company with the investment community in the long term.

Posted by Galileo | Report as abusive

The employees should be super happy and work super hard which will make the stock sky rocket once the economy turns. Better for the current stock holders in the long run.

Posted by johnjuan | Report as abusive