You Can Now Buy Google Stock Options Direct From Matt Cutts

10 comments

Well, maybe Matt isn't interested in selling, but Google has done something innovative in the way they handle employee stock options. In the past, employees with stock options had one way to cash out - they could buy stock with the options at the below-market option price. The couldn't sell the options to anyone else.

Google has changed that by going to transferrable stock options with a two year life. Employees don't need to buy stock to cash out as they can just sell the options directly. This makes the options more valuable, and the Google employees just a little bit more wealthy.

Comments

I think in many ways Google

I think in many ways Google wants to use itself as the test case to make markets they can then dominate. As much as this might be about showing employees the value of stocks it might also eventually be about playing a much larger role in financial markets. After all, who has more market research data than Google, especially as they collect more and more data?

Tax dodge

I bet its a tax dodge.

Also sone one who buys the options from a G employee cant then resel that option - which sounds very dodgy.

I dont belive the "It is very difficult for employees to understand what their options are worth"

All those PHd's and they cant work that out :-)

Black Scholes Option Theory

Figuring out what you would get if you sold your option today is something my ten year old could do. It's just basic arithmetic.

That's not at all the same as figuring out what the option is worth, assuming you don't have to sell it today. The guys who came up with the basic formula for valuing options that can be exercised sometime in the future won a Nobel prize for their efforts. There are now about a million variations and refinements of the original concept, and you can find Ph.D.s in finance that don't really get it.

All the same, I'm sure Matt could figure it out. The guys in the law or marketing departments, however, might need some help.

I think the BS modle only works for freely traded options

When I read the article

It said that you can't resell the option once brought from a Google employee so Ime not sure you can use the BS modle.

Why not issue Warrents instead of options.

There have always been

There have always been market makers for employee stock options. This is only news because Google is in the title.

Liquidate GSUs Fast

No,

This is done for one reason and one reason only:

The GOOG Execs must know they can't keep up "spectacular" quarters for long, becuase, well, advertisers and consumers are dropping out. While this rationally affects YHOO's stock negatively, GOOG's jsut keeps going up to 500.

What will happen if GOOG starts to free fall is all these new 2005 - 2006 employees will see their presumed bonuses for years to come depreciate by 20-50% or more in a single month and they'll panick. They'll seek to leave goog immediately to cash out at $300, $250 whatever, because that is the only way they can cash out of the yet-to-be-declared-legal GSU construction.

By allowing them to sell now, they somewhat greatly mitigate this problem. So, it's actually quite wise on the company's long-term productivity but there's a reason none of the insiders have *ever* bought a share of GOOG stock after IPO.

What woudl be a *real* trick is if the GSUs end up on the options market directly, esp. if they ended up in 2008-2009 LEAPS... then you'd still get most of the advantage (and disadvantage, as I'm sure the GSUs would be calls as opposed to puts) of long-term stock ownership. But it would potentially greatly inflate the options market so that it too is unreachable by the small guy...

Do I have to join Matt in a regular debunking?

> They'll seek to leave goog immediately to cash out at $300, $250
> whatever, because that is the only way they can cash out of the
> yet-to-be-declared-legal GSU construction.

Vesting doesn't change. Leaving the company early would offer no financial benefits.

I know it's crazy, especially for Threadwatch, but I gotta ask: are there really so few people here who have no uncynical days? ;).

While one could argue that more potential profits for Googlers = happier Googlers = more productivity for Google = more profit for Google (HA! See, it's all greedy!), I think most of us Googlers are just pleased that the company is again doing something creative and cool to help its employees or users out.

"somewhat greatly

"somewhat greatly mitigate"

Outstanding.

I have uncynical hours, Adam

Can't remember any uncynical days but I'm still trying. All those years practicing law had an impact on me.

All the same, I do think this is a cool thing, and I think a lot of other companies are going to copy it.

Ah, I understand about the law thing

I was JD'd (law degree'd) in '98.

I do think not taking the Bar (much less practicing) helped preserve more of my uncynical disposition :)

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