VMware Resetting Employee Stock Options (VMW, EMC)
The company submitted a filing outlining this plan. Its board of directors has approved a proposal to exchange employees' post-IPO out-of-the-money stock options, but this has to be approved by stockholders and the company is scheduling a special meeting to gain that approval.
All U.S.-based non-executive employees of VMware holding stock options granted after the IPO will be able to exchange their out of the money stock options for an equal number of new options. non-US employees will be granted a to-be-determined proportionate number of restricted stock units after the exchange offer for U.S. employees is completed.
Participation is voluntary and the exercise price of the new options will be the stock price at the close of trading on the day immediately following the date that the exchange is completed. The exchange will restart options’ vesting schedule, which means some employees who were biding time to the vesting date might not participate depending upon their goals. Executive officers of VMware will not be eligible to participate.
As long as EMC Corp. (NYSE: EMC) is on board with this initiative, you can consider this a done deal as it is majority owned by EMC. This will likely result in additional charges on a GAAP basis under new rules, but we won't try to calculate that ahead of time without knowing the specifics.
With shares at $39.00 and down from well over $100.00 after its IPO, you can bet that many of the stock options issued over the last year are under water. Its post-IPO (nearly 52-weeks) trading range is $36.51 to $125.25.
Jon C. Ogg
July 17, 2008
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