The Option Plan
I'm a believer that employees work harder and stay longer if thay have an ownership interest in the firm they work for. In that regard I support the concept of option plans. But I don't like the plan the Wave is proposing because it is excessive.
Consider it from an individual employee's position. Say a heavy hitter accepts a job because of her interest in Wave's business and picks up 500,000 options with a strike of $3.00. If Wave performs only a fraction as well as most of us envisage, the share price in 3 years should be well over say $43. The heavy hitter will be sitting on options worth $20,000,000! That is way above what any talented individual could expect to earn in most positions unless they are CEO of a tech firm or a hedge fund trader. Wave just doesn't have to pay that much to attract new talent. 100,000 options, potentialy worth $4,000,000 in the above scenario, should be good enough if the new hire truely believes in Wave's future prospects. I get worried when SKS believes that 166,000 options are not enough to get the job done. Give your head a shake, Steve.
Consider it from a broader firm perspective. Once again if Wave does well, it should be worth about $2,000,000,000 in about 3 years. If the firm gave out 20mm options on top of the 40mm shares currently outstanding, the option holders would own 1/3 of the firm, worth about $700,000,000. Assuming this was spread out over 50 key people, this would equate to $14,000,000 an employee. Once again, excessive in my mind. Off course the options would not be granted in such an egaliterian way, so I imagine the likes of Jerry Feeney would have options worth hundreds of millions. Sorry Jerry, while its true you have been a loyal employee, the fact is you have been well paid and you just not entitled to such a rich payout. I would like to see you settle for only a few tens of millions.
I will vote against the proposed option plan. There are too many options and the individual grant levels are excessive. I would vote for the plan if it had only a modest increase in options available for grants and did not change the number of options that can be granted to a single employee.
I used a what I considered to be a modest share price of $40 to $50 in the above discussion. I'm actually hoping for quite a bit more in 3 years, like $150, and under those conditions the value of the proposed options goes from simply exessive to grotesque.
