Stock backdating definition
Do you ever wish that you could turn back the hands of time? Some executives have, well, at least when it comes to their stock options. In order to lock in a profit on day one of an options grant, some executives simply backdate set the date to an earlier time than the actual grant date the exercise price of the options to a date when the stock was trading at a lower level. This can often result in instantaneous profits! In this article, we'll explore what options backdating is and what it means for companies and their investors. Most businesses or executives avoid options backdating; executives who receive stock options as part of their compensation, are given an exercise price that is equivalent to the closing stock price on the date the options grant is issued.
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The Dangers Of Options Backdating
Backdate | Definition of Backdate by Merriam-Webster
Awarding employees with stock options those are dated prior to the actual grant date. The practice is illegal if it is not followed by proper disclosure and related expenses are not recorded in financial statements. Historical term used in the context of general equities. A specialist or another broker is bidding higher or offering lower than we are, often topping or undercutting us by an eighth. Enter up to 25 symbols separated by commas or spaces in the text box below. These symbols will be available during your session for use on applicable pages. You have selected to change your default setting for the Quote Search.
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Options backdating is the practice of altering the date a stock option was granted, to a usually earlier but sometimes later date at which the underlying stock price was lower. This is a way of repricing options to make them valuable or more valuable when the option " strike price " the fixed price at which the owner of the option can purchase stock is fixed to the stock price at the date the option was granted. Cases of backdating employee stock options have drawn public and media attention.
In this way, the exercise price of the granted option can be set at a lower price than that of the company's stock at the granting date. This process makes the granted option "in the money" and of value to the holder. This process occurred when companies were only required to report the issuance of stock options to the SEC within two months of the grant date. Companies would simply wait for a period in which the company's stock price fell to a low and then moved higher within a two-month period.
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