Comverse workers must exercise options
In letter to its former employees, technology company requests that they exercise within one month stock options that are out of money following share crash
Last April, Calcalist revealed that “Comverse past and present employees will be able to exercise their options within several days once Comverse’s shares will be back on NASDAQ’s major exchange."
On February 2007, Comverse’s share was delisted from NASDAQ’s major exchange and moved to the pink sheets after the company stopped releasing financial reports following the backdating scandal in which three executives from the billing company who backdated options were prosecuted.
Since then, Comverse put the stopper on employees’ right to exercise their options. Now, days after Comverse was relisted on NASDAQ’s major exchange, the service provider for communication operators is giving its employees a one month deadline – until November 4 – to exercise their stock options.
Another essential point arising from the letter is that all options which have expired will yield no compensation to their owners. Despite the ban Comverse imposed on exercising options in the past five years, the company chose not to compensate employees by extending expiration dates, thus the employees will no longer be able to exercise them.
Since the backdating scandal, 13.7 million options expired at an average strike price of $10.78 per share while Comverse shares have since taken a 77% nosedive.
Converses share on NASDAQ was $6.8 per share at Tuesday’s opening bell, which means that expired options are far out of the money. This means that these shares could have been deep in the money thus the company’s employees lost over $150 million.
Share slow on takeoff
Shares that are relisted on NASDAQ usually do so in face of mounting demand which leads to steep rises of the share price. The reasons for this are increased transparency of the company’s activities vis-à-vis investors and the fact that many investment funds abide by ruled barring them from investing in public companies which are not listed on a major exchange.
It is therefore possible that had Comverse allowed its former employees to hold on to their stock options for an extended period of time, they might have been able to enjoy a possible gain in Comverse’s share and pocket a handsome profit on the options that have not yet expired.
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