Attorney question of the day?

Q: Do employer stock option games (see previous post on this blog) effect the value of employee stock options for litigation purposes?

A: Yes they do.

One key component in the valuation model (Black Scholes or other) is the grant price. If the grant value changes then the value of employee stock option changes. The higher the grant price the lower the intrinsic value of the employee stock option for litigation purposes.

With that in mind, options on employee options, like back dating and spring loading that was discussed in the previous post, provide a unique challenge when valuing for litigation purposes. The solution can be as simple as changing the valuation date and vesting dates in the mathematical model or more involved. Most option on employees by employers are unique to that employer.