This belongs on the WAVX site...
from last year's Q2 CC:
(bolds mine)
Stein: Right. Steven, I don't mean to really put you on the spot here, but I was, I couldn't help but notice that with the momentum in the stock and certainly the share price, you exercised options for 150,000 shares at a strike price of $2.01, and also your CFO sold 100,000 shares. What message do you think that sends to shareholders? Because I was disappointed, quite honestly, to see that.
SKS: So, let me explain what my decision process was on that. It was quite simple which is that we have a number of options that are available to us, but we've also had a very short term cash issue.And it became very clear as a number of employees exercised options, that the message ran around Wave, that an employee exercised option, exercising options, was benefiting the corporation. And this is not a message that was propagated by management. This is a message that came up through the troups at Wave. And you can see that there were options that were exercised that range from $1 to $4. So an option exercised at $4 on basically a minimal dilutional basis generated very significant cash for the company. We are in a substantially stronger position today because of employee stock option exercises. The additional $3m that that generated, or $2.5m that generated for the company, I think is going to make a huge difference in the types of options that are available to us. And as a CEO…
Stein: There's no doubt about that…
SKS: I felt that it was appropriate to be able to say to my employees that if they went and exercised options and therefore gave up some of the long term value, because we believe in this thing!, that it's appropriate for me to do some of the same. So I don’t want to be in a position where I can just say, well hey, I'm the only person who didn't. So I think that the message was, here's an opportunity for the employees of the company to exercise some options and help the company achieve being in a much stronger position. And this is a transaction that of course all of us could do without taking any time, in a market that was highly liquid, so I don't think that we had really any effect on the share price. And we are in a phenomenally stronger position today because of an additional $2.6m in cash.
Stein: You missed the point of my question, it wasn't the exercising of the options, which of course helped put some needed money into the coffers of the company, it's the fact that you immediately sold the underlying shares.
SKS: So, I learned this lesson the hard way. I exercised and held options. Used to do that. Never again. I had a 280,000 AMT tax bill in 2000, and I have a mortgage on my house because of that $280,000 AMT tax bill. And, I have friends who pretty much got close to going bankrupt because of AMT. So, I learned my lesson, and I learned it the hard way. And the reality is, you don't want to get into a situation where you've wrote the options exercise check, so not only I have to spend money for the options, but then I've gotta go pay the tax bill on the differential, and this is nuts. So, if I exercised options and didn't immediately sell them, first off my wife would shoot me, and it's been a real challenge for a lot of our employees…
Stein: You could have waited. Obviously the stock is a lot higher now. And it doesn't, to try to entice other people to buy the stock when it's at $3.50 when you sold it at 2 isn't a great incentive. That's my only point. <crosstalk>
SKS: And I appreciate that. My motivation was very much the specific issue of, if we could help generate cash for organization, it was absolutely the right thing to do. And you know I have room to move right now, because we did this and it helped signal to other employees that it was comfortable to do this. And it really helped us in the market. So, there are other times where I can say that people have sold stock, where they made a decision one way or another, and I can agree with you. This time, this cash was incredibly value to you the shareholder, because it gives me choice. [?]
AI
