Biotech Values

[poorgradstudent]

I concur; that is a good article from the WSJ.

I think that any corporate action that concentrates too strongly on stock price is a distraction and should be avoided. This includes convening to determine dates of option grants, publicly addressing "shorts" and their affect on share price, etc...

I caught your comment on SI regarding prespecified dates. I had the same thought at first, but it could also be subject to abuse. As you said, companies could compensate for the single day's stock price by playing with the number of options granted.

One alternative would be to tie the exercise price subject to an "x" month average of the share price, prefereably a timeframe of the most recent 6 - 12 months. For annual option grants tied to the 10K filing, the 6-12 month timeframe would be the most recent 6-12 months for the fiscal year that is being reported. For options granted on dates not coinciding with a 10K filing, you could tie the price to the most recent 6-12 months of stock prices.

I think this would more strongly align management interests with those of the shareholders. With a 6 month rolling period (for example), management that performed well over the past year would still reap rewards for their performance by being granted options that are likely priced below current market levels. This would also make management responsible for poor performance over the year, as a declining stock price would mean that their option grants are at strike prices above current market levels.

Making it a 6 month rolling average would also prevent management from unduly rewarding themselves if they undertook a recent initiative that appeared to turns things around for the company following a year's worth of dismal performance. Or if their stock simply hit bottom following a horrible year for shareholders.

So case in point, Colin Goddard's brutal impact on the OSI shareprice over the recent fiscal year would mean that he gets some options that are priced around 50 per share, rather than the ~30 dollar share price that the stock currently trades at.