SEATTLE — Microsoft Corp. employees soon will get a choice between holding on to now largely worthless stock options or trading them for cash, the software company announced last week.
Under the program, employees can sell their options to J.P. Morgan Chase Bank for an amount that will depend on the price of the option, Microsoft’s closing stock price averaged over a 15-day period, and other factors
Options are opportunities to buy stock at a set price. But Microsoft’s stock is now trading lower than the price that many workers would have to pay to exercise their options, making those options essentially worthless or "underwater."
Microsoft said in July it would devise a program to let employees sell those underwater options as part of an overall shift from stock options to outright grants of stock to workers.
The transfer program is open to employees with options priced at $33 a share or higher, the price of Microsoft stock before the boom of 1999 and 2000.
Employees have until Nov. 11 to decide whether they want to participate in the program.
Microsoft said in an earlier filing that a maximum of about 635 million options could be traded in.
The program lets employees get rid of their options or hold out for a surge in the stock price, said Brendan Barnicle, an analyst with Pacific Crest Securities.
Although shareholders may be wary of the potential of as many as 635 million shares coming back onto the market, Barnicle said those shares probably will be put for sale in a controlled fashion with Microsoft being the main buyer.
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