The Truth About Verity's Options Grants
Editor's note: This column is a special bonus for TheStreet.com readers. This piece originally appeared on RealMoney on June 4, and we're giving you a sneak peek at the entire column.
To sign up for RealMoney, where you can read Arne Alsin's commentary regularly, please click here for a free trial. Alsin also has a premium subscription service, The Turnaround Report. To subscribe, please click here for more information.
At companies like Verity (VRTY), the magnitude of employees' property grab via stock options is nothing short of stunning. The title of my earlier column on the subject, "Corporate America's Dirty Little Secret," is unfortunately all too appropriate: It's the stealth transfer of wealth, under the guise of aligning employee interests with shareholder interests through stock options.
Before we look at Verity, let's break the case down in the simplest terms possible. Stocks represent shares of ownership in a publicly traded business. To use a metaphor, the company is a pie, and the number of slices that you have, relative to the total slices, represents your ownership interest.
Tough TruthsThe most aggressive option issuers (and the most ardent and vocal option defenders) tend to be in the technology sector. Verity, a software concern with a $750 million market cap, is an example of a company that is aggressively effecting a transfer of ownership from shareholders to corporate employees. After reviewing Verity, it's hard to miss the obvious irony: The word verity means truth. The truth is, the number of options granted each year is outrageous:
|The Hard Truth About Options
Here are the grants relative to share base
|Shares Outstanding Beg of Year||22,036||23,130||25,612||31,606||35,158|
|Annual Option Share Grants||5330||5604||6567||8418||7164|
|Annual Grants as a % Shares||24%||24%||26%||27%||20%|
|Source: Alsin Capital Management, SEC filings|
Select the service that is right for you!COMPARE ALL SERVICES
- $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
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV