What is backdating stock

Rated 4.25/5 based on 621 customer reviews

In its most basic form, backdating can range from the blatant falsification of a document to take advantage of a lower stock price to allowing executives to select a grant date during a specified period, for example during the 30 days after the grant is approved by the board or committee.

what is backdating stock-82

what is backdating stock-87

what is backdating stock-49

what is backdating stock-69

Most employee stock options are, or purport to be, granted “at-the-money,” meaning that the exercise price of the option equals the market price of the underlying stock on the date of the grant.

Never, you might say, have so many cheated so much to gain so little.

The most common stock options are known as “at the money” options, which let you buy the company’s stock at the price that it had on the day of the grant.

As it happens, companies are perfectly free to issue options priced below the current market: those are called “in the money” options, and they’re worth something right when they’re issued. But there’s a rule that companies have to follow when they issue “in the money” options: they have to disclose it in their financial statements. Unless executives can time-travel, though, it’s hard to make that case for backdated options.

The backdating companies broke this rule: they reported how many options they were issuing, but conveniently omitted the fact that they had been backdated. The bigger reason for choosing to backdate is to get around some bothersome accounting regulations.

Leave a Reply