Google will allow some employees to auction off their vested stock options to institutional investors, enabling workers to potentially reap greater profits from their options, the company said Wednesday.
Under Google’s transferable stock option program, employees will be able to auction off options issued after the company went public. Currently, employees have one of two choices when it comes to vested options, either exercise them and purchase Google shares or hold onto the options and exercise them at a later date.
The ability to transfer vested options through an auction will allow Google employees to cash in on what the company calls the “time value” of the options, or the potential of Google’s stock price to rise higher in the future. “Financial institutions such as banks may be willing to pay a premium above the intrinsic value for many options because of the time value,” Google said in an texplanatory document.
The program will benefit Google employees who have been issued options with strike prices — the price that the option is exercised at — that are below the stock’s current market price, Google said. “Financial institutions do place value on ‘underwater’ stock options … and we expect them to bid on underwater options,” it said.
Approximately 6.6 million options, including vested option and non-vested options, have been granted since Google went public. Google executives who are part of the company’s executive management group are not eligible to participate in the scheme, the company said.