eBay Clings to Its Options Habit
If shares of eBay (EBAY) are a good thing, then managers of the sexiest company on the Internet may be getting too much of a good thing.
Over the past three years, eBay has been one of the most generous givers of options, even among technology companies known for their open-handed option allocations. And while there's no sign yet that eBay investors are concerned about the company's option grants -- eBay shares hit a new 52-week high Tuesday and closed up $3.61, or 3.6%, at $103.05 -- shareholders' equity is diluted when options are granted. And if regulators prevail with a plan to force companies to treat stock options as a regular cost of doing business, the price of options would become even more direct.
At the end of last year, there were 1.2 shares in unexercised stock options for every 10 eBay shares outstanding. At Tuesday's market capitalization, that means options on eBay shares (vested and unvested) worth nearly $4 billion are held by company employees.
There's more. At its annual meeting next month, the thriving online auction company will ask shareholders to approve a greater-than-50% increase in the number of shares it can award under its current stock-option plan. If approved, the measure would mark the third-straight year that eBay has increased its pool of options, a fact that is starting to raise the eyebrows of investor advocates."It sounds like they haven't transitioned to the new day in executive pay very well," said Scott Klinger, co-director of the advocacy group Responsible Wealth. Already a prolific dispenser of options, eBay has increased its largesse even as other tech firms are reining in the practice. eBay representatives did not return calls seeking comment on the company's stock-option proposal. But in the company's proxy statement, filed earlier this month, eBay's board urged shareholders to approve the measure, saying that stock options assist in attracting and retaining employees.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV