October 30, 2023
Option Repricings: Primers for Public and Private Companies
Earlier this month, I blogged about biotech companies reconsidering using options as the sole award type — specifically, whether that continues to be advisable in a down market after stock prices dropped and options remained underwater. Another “option” often considered — but less often pursued — in these circumstances is a repricing.
WilmerHale recently released a primer on option repricings for public companies. To call repricings “complicated” would be an understatement — they present many traps for the unwary and often elicit shareholder and proxy advisor scrutiny. This primer is a helpful resource for public companies considering repricing underwater options and gives a current summary of the legal issues involved, common structures, the implementation & approval process and alternatives to repricings. In particular, take a look at the chart with pros and cons of each common structure. While significantly more straightforward, the WilmerHale team also released a separate primer that addresses structural, tax, securities laws, accounting and consent considerations of option repricings for private companies.
– Meredith Ervine