This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Electronic Arts Opens Employee Stock Spigot

EA argues that the exchange plan would benefit shareholders by reducing some of the prospective options dilution. The company plans to give one share of restricted stock for every three to four shares of options that employees exchange, depending on the exercise price of the options.

And the company won't allow employees to exchange every underwater option for a restricted share. Employees will only be able to exchange options whose strike prices are at least 15% higher than the average closing stock price for the five days preceding the beginning of the exchange program.

Currently, nearly 16 million outstanding options at EA would qualify for the exchange program. Assuming all of those options were exchanged, the company would grant about 4.8 million restricted shares in their place, according to the proxy statement. So, on the surface, the company would reduce its overhang of employee stock grants by about 11.2 million shares, or about 3.6% of the company's outstanding stock.

But the reality is that the reduction won't be near that amount. The program won't be compulsory, so some employees may choose not to participate.

More importantly, though, there are all the additional options and shares the company aims to hand out. First, the company plans to dispense a total of 2.2 million options and 600,000 restricted shares as part of the retention program. And EA could continue to hand out options that could ostensibly be exchanged for restricted shares between now and the time the exchange program begins.

Then, the company is asking shareholders to hand out a raft of new restricted shares in the future. As part of the second proxy proposal, the company wants shareholders to boost the limits on the number of restricted shares it can hand out from 4 million to 11 million.

3 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
THQI $0.31 0.00%
ATVI $22.43 -1.30%
AAPL $124.25 -0.14%
FB $81.66 -0.67%
GOOG $542.56 -0.99%


DOW 17,698.18 -77.94 -0.44%
S&P 500 2,059.69 -8.20 -0.40%
NASDAQ 4,880.2280 -20.6570 -0.42%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs