Apple Investigated Over Stock Options

blamanj writes "Apple has joined the list of over fifty companies (most in Silicon Valley) that possibly mishandled stock options by backdating them. The technique is not illegal, but it can cause a company to improperly deduct employee compensation expenses and result in an underpayment of taxes. So far, Apple is conducting the investigation itself, but it has notified the SEC."

Comments

CORRECTION.

[jcr]

This headline is complete BS. Apple's own internal auditors found something that might be an issue, and Apple reported it to the SEC themselves.

-jcr

Re:I'm investigating myself.

[Otter]

It's not (at the moment) illegal per se. It does lead to accounting, disclosure and tax improprieties if it's not reported.

In any case, the self-investigation does seem strange -- how could the company not know if it had been done? If they really don't know, I'd say that's an issue in itself.

Worst of all, backdating costs investors

[GringoGoiano]

When the employee exercises a stock option they are paying the company for the share. If the company back-dates an option to lower the strike price for an employee, the employee pays less for it.

Scenario:

• No back-dating:
     
  • 
       
  • company stock price 2006/07: $25
       
  • company stock price 2006/09 (stock grant date): $30, stock strike price set at $30
       
  • employee exercises/sells 1 share on 2010/09, current price $50: employee pays company $30, employee sells $50, $20 profit
       
  
  
• Back-dating:
     
  • 
       
  • company stock price 2006/07: $25
       
  • company stock price 2006/09 (stock grant date, but back-dated to 2006/07): $30, stock strike price set at $25
       
  • employee exercises/sells 1 share on 2010/09, current price $50: employee pays company $25, employee sells $50, $25 profit
       
  
  

The employee makes a bigger profit, the company loses. This is the worst
side-effect of back-dating stock options. You're cheating the other shareholders.