ThoughtPiece: Making Sense of the Options

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With all the kafuffle that’s been surrounding RIM’s stock options, our pal Thought’s put together a piece (thus the name ThoughtPiece – so clever) explaining exactly what’s up with the buying and the selling and the high’ing and the low’ing. Thanks, Thought.

First came the announcement on September 28 by RIM that they will restate their historical financial statements to reflect accounting errors tied to certain stock-option grants. Then last week (on Friday the 13th of all days) came the announcement that this restatement would be delayed due to further technical complications.

lazpeng.jpgSo should BlackBerry fans be getting nervous? Will Jim Balsillie need to seek refuge as a hockey team owner? Will Mike Lazaridis need to get a job teaching physics?

My advice is this: take a deep breath, be (BlackBerry) cool, and let’s try to navigate through this rather arcane subject.

What are Employee Stock Options?
The concept is simple. A business grants an employee the right to buy a specified amount of company shares at an “exercise” price, usually the price on the day the option is granted. The company specifies when the employee can exercise these options. If the company stock price goes up, the employee can purchase the shares at the exercise price and then sell the shares at a higher price and realize a profit. The intention is to reward the employee financially in a way that aligns the employee’s interest with that of the company.