Google Announces Transferable Stock Options

Posted on December 12, 2006
Filed Under Companies |

This is an interesting move by Google, it effectively creates liquidity for vested but unexercised options. I would be curious to know what the tax implications are, if any, beyond simply exercising and selling the stock. While this is all well and good for employees by making it easier to sell options through the privileged position that financial institutions will enjoy, it seems that the real beneficiary here is Google itself by creating a market for valuing options through a realtime market that values employee options based on the difference between the exercise price and the market price instead of Black-Scholes. Interesting although somewhat unique due to the market position and valuation that Google enjoys and the relatively small float on the stock which creates huge demand.

BTW, the new Google Finance page has a number of very nice upgrades.

UPDATE: Actually, in looking at how this program works it may not result in Google having that much of a benefit given that there will likely be additional expense charges for Google because institutions will hold the options longer than employees. It’s definitely an interesting program, they should get credit for innovating in an area that few would have expected.

Official Google Blog: About Transferable Stock Options: As with most employee stock option programs, Google’s program to date has allowed employees to do two things with their options. Upon vesting they can (1) hold them or (2) exercise them and then hold or sell the stock. With the new TSO program, employees will have an additional alternative: they can transfer (sell) their options to a financial institution through a competitive bidding process. The ability to sell options is not a novel concept — today people can buy and sell options to purchase GOOG stock and the stock of many other companies on the public markets. What is novel is that we are extending this ability to trade options to employee stock options.

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