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Go Back   SailNet Community > General Interest > General Discussion (sailing related)
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  #1  
Old 02-22-2007
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stock options

This is a peculiar question for a farm animal to be asking, but I need a quick answer. Do stock options expire in the event that a company sells, or are they just transferred? If I don't come up with an answer right away my wife will think I'm an idiot. The Fidelity line is one long menu... I know this doesn't have anything to do with sailing. Pretend it's to buy a boat.
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Old 02-22-2007
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Thanks for the quick answer! WHAT ARE YOU PEOPLE DOING OUT THERE?
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Old 02-22-2007
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??

I don't know the answer, but I question the question a bit...

If you have stock options in a publicly-traded company and it announces that it has accepted an offer to be purchased, there are several months of due diligence that has to occur prior to actually completing the transaction. During that period, the stock of the 'selling' company is still tradable - typically at a discounted price to the offer price in case the deal goes south. Thus, I would think the options are still executable/tradable during that period.
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Old 02-22-2007
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Many thanks, welshwind...
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Old 02-22-2007
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If it is a cash buy out of the company the trading market for the stock would disappear and the options would be worthless unless there was some provision in the option agreement for a cash out at fair value. If a stock swap is involved the options would likely be converted into the stock of the new company. What determines the value of the options in a buy out is the underlying terms of the option agreement. I usually bill $500 per hour for this advice at my firm but you won't get charged.
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Old 02-22-2007
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Even with a cash buyout ...

it still has to go through the due diligence process and shareholder approval. Thus, there is still time to do something about it (if it makes financial sense to do something and not just let them go).
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Old 02-22-2007
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Quote:
Originally Posted by longwaterline
I usually bill $500 per hour for this advice at my firm but you won't get charged.
I recall my coke dealer saying something like this to me way back when... Thanks, longwaterline...
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Old 02-22-2007
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Options

Quote:
Originally Posted by sailhog
This is a peculiar question for a farm animal to be asking, but I need a quick answer. Do stock options expire in the event that a company sells, or are they just transferred? If I don't come up with an answer right away my wife will think I'm an idiot. The Fidelity line is one long menu... I know this doesn't have anything to do with sailing. Pretend it's to buy a boat.
First you should read the options agreement to see how/whether it addresses this circumstance. I don't believe there is any standard option agreement - your company will have written its own, although there are common characteristics.
I had an option agreement in a company that was acquired in 2006 - under a sentance buried in a sub-paragraph at the back of the agreement, all options, both vested and un-vested, paid out cash on the date of the aquisition at the aquisition price. Something of a bonanza...
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