Method and system for creating and marketing employee stock option mirror image warrants
A warrant on company stock that is used to determine value of employee options for U.S. accounting purposes on company stock. The warrant comprises an amortization factor, an exercise term that is the same or substantially similar to an exercise term of the employee options, and a strike price that is the same or substantially similar to a strike price of the employee options. The warrant also comprises a provision to periodically determine the amortization factor based on early forfeiture and/or early exercise of the employee options, a provision to apply the amortization factor to the warrants, and a provision to determine an intrinsic value of the warrants. Value of the employee options for U.S. accounting purposes is determined using market value of the warrants at issue.
1. A computer-readable medium having computer executable software code stored thereon, the code for determining value of employee stock options, the code comprising:
code to issue a plurality of employee stock options to company employees on company stock, wherein the employee stock options include an exercise term, a strike price and a restriction on transfer or hedge;
code to issue a plurality of warrants on the company stock, wherein the warrants include an amortization factor, the same or a substantially similar exercise term as the employee stock options, the same or a substantially similar strike price as the employee stock options, and provisions to periodically determine the amortization factor based on early forfeiture or early exercise of the employee stock options, provisions to apply the amortization factor to the warrants and provisions to determine an intrinsic value of the warrants;
code to determine the market value of the warrants at issue; and
code to determine the value of the employee stock options using the market value of the warrants at issue.
2. A programmed computer for determining value of employee stock options, comprising:
a memory having at least one region for storing computer executable program code; and
a processor for executing the program code stored in the memory, wherein the program code comprises:
code to issue a plurality of employee stock options to company employees on company stock, wherein the employee stock options include an exercise term, a strike price and a restriction on transfer or hedge;
code to issue a plurality of warrants on the company stock, wherein the warrants include an amortization factor, the same or a substantially similar exercise term as the employee stock options, the same or a substantially similar strike price as the employee stock options, and provisions to periodically determine the amortization factor based on early forfeiture or early exercise of the employee stock options, provisions to apply the amortization factor to the warrants and provisions to determine an intrinsic value of the warrants;
code to determine the market value of the warrants at issue; and
code to determine the value of the employee stock options using the market value of the warrants at issue.
3. A computer-readable medium according to claim 1 , wherein code to issue the plurality of warrants is by SEC registered offering.
4. A computer-readable medium according to claim 1 , wherein code to issue the plurality of warrants is by 144A offering.
5. A computer-readable medium according to claim 1 , wherein code to issue the plurality of warrants is by private placement offering.
6. A computer-readable medium according to claim 1 , wherein the plurality of warrants do not include a restriction on transfer.
7. A computer-readable medium according to claim 1 , wherein the plurality of warrants include a limited restriction on transfer.
8. A computer-readable medium according to claim 1 , wherein the plurality of warrants include a full restriction on transfer and hedging.
9. A computer-readable medium according to claim 1 , wherein the provisions to periodically determine the amortization factor is based on early forfeiture and early exercise of the options.
10. A computer-readable medium according to claim 1 , wherein the provisions to periodically determine the amortization factor is based on vested options.
11. A computer-readable medium according to claim 1 , wherein the provisions to periodically determine the amortization factor is based on a reference pool of options.
12. A computer-readable medium according to claim 1 , further comprising code to hedge the warrants.
13. A computer-readable medium according to claim 1 , further comprising code to hedge the warrants after a certain period.
14. A computer-readable medium according to claim 1 , wherein a number of warrants issued is a percentage of a number of options issued.
15. A computer-readable medium according to claim 1 , wherein the number of warrants issued is about 5 to 15 percent of the number of options issued.
16. A computer-readable medium according to claim 1 , wherein the provisions to determine the amortization factor occur about every quarter.
17. A computer-readable medium according to claim 1 , wherein the provisions to apply the amortization factor occur a predetermined number of days after determining the amortization factor.
18. A computer-readable medium according to claim 1 , wherein the provisions to apply the amortization factor occur about 30 days after determining the amortization factor.
19. A computer-readable medium according to claim 1 , wherein the plurality of warrants further comprise a provision to settle a value due to holders of the warrants after determining the amortization factor.
20. A computer-readable medium according to claim 1 , wherein the plurality of warrants further comprise a provision to change terms of the plurality of warrants in response to a change in terms of the options.
21. A computer-readable medium according to claim 1 , wherein the plurality of warrants further comprise a provision to deliver a product of the intrinsic value and a fraction subject to prepayment.
22. A computer-readable medium according to claim 1 , wherein the provision to determine an intrinsic value of the warrants is after applying the amortization factor.