Case Study 3: Stock Option Grant Practice
Background
CGP was engaged by a client to review its stock option plan. This private company used an atypical exercise price for its stock options that set its common stock option exercise price equal to the value of another class of shares and requested an independent opinion on the viability of this practice.
Analysis
CGP reviewed the stock option plans of the company’s valuation comparators, paying specific attention to exercise prices and vesting provisions. We also reviewed stock option plans of companies in the broader market in addition to conducting research into best practices for stock option plans, including performance stock option plans.
Outcome
CGP provided an opinion outlining that the company’s current option exercise price was not aligned with market practices and recommended that it confer with counsel to assess any potential liability from their current practice. The client took steps to modify its stock option practices to align with best practices.