Backdating option grants

10-Dec-2017 16:33

As a result, to keep favorable ISO tax treatment you'll have to wait at least two years from the grant date — and one year from exercise date — to sell your stock (in a secondary transfer, company repurchase, or company acquisition), and also you'll have to pay a higher price to exercise your option based on the funding event.

A Series A funding doesn't necessarily bump up the appraisal of common stock all that much, but if you have a lot of stock that will mean a lot to pay.

Executives do it because they believe that if they don’t the stock market will punish them. As the investment strategist Michael Mauboussin puts it, “The market follows cash flows,” not earnings.

That can be done by directly stating the new formula, as does in his answer, or by using vesting start dates and cliff dates that are in the past, then stating that if this schedule would have created any vesting dates occurring before today, then that number of shares is vested as of grant.They played games with their accounting because they thought investors weren’t smart enough to look at the fundamentals.