To keep the value of the "under-water" employee stock options afloat, company may
A) shorten the vesting period
B) raise the exercise price
C) buy back all outstanding common shares in the market
D) lower the exercise price
E) lengthen the vesting period

Question

Quizplus · Accepted Answer

Lowering the exercise price of the employee stock options will make them more attractive and valuable to employees, and may entice them to stay with the company. This can also help to mitigate the "under-water" situation where the stock price has fallen below the exercise price of the options. However, it is important to note that this strategy may dilute the value of existing shareholders' equity.

To Keep the Value of the "Under-Water" Employee Stock Options