What happens to stock options when a company is bought out?
May 23, 2005
Subject: Stock option Question
Date: Wed, 04 May 2005
What happens to vested stock options that are “under water” if the company is bought by a public company?
For example, company A granted options to purchase 1,000 shares @ $20 which are vested. The trading price for the stock is $17. If company B buys company A and the company B stock price is $25, what will happen with the employee stock options of company A?
Date: Fri, 13 May 2005
If company B simply buys out company A or buys out the assets of company A, the options may simply disappear.
If the transaction is structured as a reorganization, a ratio may be determined to convert the employee stock options to options for company B shares.
If you are in this situation, your company should tell you how you will be affected.