RNWK Jan calls

Discussion in 'Options' started by nutmeg, Dec 3, 2009.

  1. RNWK issued options to employees when the stock was over $6.00.

    Since the options were given, the stock has dropped below $4.00 and has stayed there for the past couple years or so. And it looks like there is no way the stock will get back to $6.00.

    So the way I understand it, there is no way the employees can trade in the options.

    I have heard there has been some agrement made with somebody that at the end of or at the beginning of next year an adjustment to the options has been agreed on.

    Either there will be a 2-1 split in the options, or there will be more options issued. Which one, I don't really know. The stock is now trading a little over $3.00. The January $5.00 calls have gone crazy.

    Any comment? Thanks
     
  2. livevol_ron

    livevol_ron ET Sponsor

    Unfortunately they employees can’t do anything in this case, the options they have are probably worthless unless the stock goes up, which is improbable. The company could issue more to them or maybe amend the other ones…

    Management should recognize when the company is no longer a growth story and switch to stock compensation like ESOP instead of ISO options. I used to work for a company a long time ago whose stock was .80, and the company was pretty much not going anywhere. They offered me something like options for 400 shares @ $2 vesting over four years. Thanks but no thanks!
     
  3. How have the Jan $5 calls gone crazy? High volume recently or just a lot more offered at 5 cts? :)

    I don't know much about Employee Stock Options so maybe I have more questions than answers.

    Aren't ESO's usually non-transferable? If so, then they won't be traded and will only come into play (exercise) if the stock rises or if somehow the company adjusts their strike down as you suggested?

    If and when the the strike of the ESO is lower enough... or better yet, the stock price is high enough to facilitate a profit, ESO exercise results in purchase of company stock by employees who then tend to sell it, realizing the profit. If that's the case, if anything, wouldn't one expect these transactions to drive the stock's price down?

    And since it's recommended that employees hedge their appreciated stock or ITM ESO's with standard options, wouldn't the expectation be that the activity would be in puts rather than in calls as you observed?

    Just thinking out loud...
     
  4. livevol_ron

    livevol_ron ET Sponsor

    The Jan 5s? For a nickel? SOLD!

    ISO = Incentive stock option
    ESOP = Employee stock ownership plan

    I am pretty sure they are not transferrable, maybe to like a spouse or something…
     
  5. What I am looking at is if the common will could go up on an options adjustment?

    Thoughts?
     
  6. livevol_ron

    livevol_ron ET Sponsor

    No way.
     
  7. AFAIK...

    What makes a stock go up in price? More buying than selling.

    The existence (and terms) of employee options has no effect on the stock's price.

    Does exercise of employee options make the price go up? No, because the source is company stock. If anything, I would say that it's dilutive.
     
  8. Thanks. I know it was an elementary question but I really needed a flat out "No way". ( I have a thick head).

    Thanks for your comments Spin, I knew I could count on you.

    Regards all.