NYT article re analyst tanking stock on charges of springloading options
By: Cydney Posner
More from the NYT on stock options, this time on the slippery slope of springloading option grants. In the instance discussed in the article today, Cyberonic'sboard approved stock option grants for top executives a few hours after hearing that an FDA advisory panel had recommended granting marketing approval for a product candidate. After announcement of the news the next morning, the company's shares almost doubled. The stock took a tumble recently after an industry analyst issued a report warning of abusive and unethical option practices. According to the article, the analyst said that, because the options were priced below the price that would become the market value once trading resumed, they should have been accounted for as compensation in that quarter. As a result, the analyst contended, the company might have to restate its earnings for that fiscal year. The company is reported to have berated the analyst for raising a "nonissue."
So far, with respect to springloading, the SEC appears to have focused primarily on the disclosure issue. It remains to be seen whether the SEC or others will take positions comparable to those expressed by the analyst in this story.
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