It's a Google Thing: Online Auctions For Options
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Googleplexers will be able to sell their vested stock options as part of an innovative online auction that could give them even more cash and clout than they might find in the major markets.
Under the Transferable Stock Option (TSO) program, employees of the search giant will still be able to exercise their options, but will also be able to sell their options to financial institutions as an alternative.
said the program represents an innovative way to compensate employees and will increase the efficiency of Google's equity compensation by increasing the per-option value of employee stock options.
As such, Google said it would amend the terms of eligible employee stock options in order to allow the transfer of vested options. Morgan Stanley got the nod to manage the auctions; Smith Barney is the ESO administrator, and Google is working with all kinds of financial institutions that might want to bid on the vested options.
As Google itself noted, selling options is not a novel concept in today's markets. It happens all the time with traders placing calls and puts or just buying and selling options to purchase Google stock and the stocks of many other companies on the public markets.
But what is different is that this approach is now being extended to employees through their employee stock options.
Google said it works like this: If an employee chooses to sell options in the TSO program, he or she will use an internal online tool built by Morgan Stanley to sell them to the highest-bidding financial institution. The financial institutions buying the options will then likely hold them until maturity and then settle with Google.
There's some time to wait yet; Google's employee stock options typically have a ten-year term from the grant date. Under the TSO program, Google's employee stock options, upon transfer, will have a lifespan of the lesser of two years or up to the remaining term under the original grant.
Google also said it expects the program to launch in the second quarter of next year. Plus, only stock options issued since Google's initial public offering will be eligible for this program, and Google's Executive Management Group may not participate in the program.
The program won't impact how it accounts for employee stock options. But Google did note that it expects the amount recognized as stock-based compensation would be greater than it would otherwise have been after the program goes into effect.
The plan marks another innovation by the Mountain View, Calif.-based tech darling. In the days leading up to its initial public offering two years ago, Google had tongues wagging over its plan to deploy a Dutch Auction for its IPO, meaning investors could name their price as a part of the price-setting process.
Overall, the Dutch Auction method was seen as a way to even the playing field for smaller investors looking at a chance to get in on a white-hot IPO.
With its latest innovation with employee stock options, Google is looking to give the little players the same kind of clout with their own options.