Siebel Offers Rank & File Option Swap

August 30, 2002 ( - Siebel Systems is giving workers an option to trade their worthless stock options back to the company for cash or stock shares.

According to a CNET news report, an option buyout is not revolutionary, but is typically offered to top brass and not – as is the case with Siebel – to the rank and file. Officials of the sales software company said in a regulatory filing that the difference is deliberate.

“We believe that providing our employees with the opportunity to participate in the offer will improve employee morale and better align our compensation programs with the interests of our stockholders,” the Siebel Securities and Exchange Commission filling states.

CNET said Siebel will pay $1.85 cash for every share on which an employee holds an option, If the bill goes over $5,000, the employee gets a stock payout. Siebel directors are not eligible, the company said. The exchange program will apply to outstanding options with exercise prices at or above $40, the company said.

‘Underwater’ Options

According to CNET, stock options grant the holder the right to buy a share of stock at a specific price, called the strike price. After the tech bubble burst, many option-holders were left with so-called underwater options in which that strike price is above the share’s value.

Siebel has suffered along with the rest of the tech world in the face of decreased corporate spending. Its stock, which reached a 52-week high of $38.38, closed late last week at $8.81.

Siebel said that roughly 31.9 million shares are eligible under the offer and that it expects to take a charge of $63.6 million in the quarter ending September 30.

Underwater options have presented a problem for tech companies that want to maintain the incentives associated with stock-option grants without having to deal with the accounting and tax problems that can arise.