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December 13, 2006 | Comments: (0)

Google and the Gooptions it offers its employees

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In a strange bit of news that I don't fully understand (not being a finance guy), Google has is opening up a market (called Gooptions) in its vested employee stock options. Paul Kedrosky has some concerns with it, and he's better positioned to comment than I.

From the Google blog:

As with most employee stock option programs, Google's program to date has allowed employees to do two things with their options. Upon vesting they can (1) hold them or (2) exercise them and then hold or sell the stock. With the new TSO program, employees will have an additional alternative: they can transfer (sell) their options to a financial institution through a competitive bidding process.... What is novel is that we are extending this ability to trade options to employee stock options.

Typically, employees get value from stock options by exercising them after vesting, and then selling the stock they get from the exercise at a higher price, provided the company's stock price has appreciated since the time of grant. With the TSO program, employees will also be able to sell vested options to the highest-bidding financial institution, which may be willing to pay a premium above the difference between the exercise price and the market price for Google stock (even when the exercise price is higher than the market price). The premium paid is for the time value of the options. More on that and how institutions would do this, and why, is here.

The part I don't really understand is whether the administrative burden inherent in this move is worth the benefit to Google employees. But they apparently do. It will be interesting to see how it works out.

What I'd much rather see is an open market in options in private companies. That would be fun.

Posted by Matt Asay on December 13, 2006 03:48 PM

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