Option Practices: A Look at the Past...


In this report we look at the option practices of the US companies that have been most successful at creating wealth for investors.

Specifically, in this report, we focus on: F2001, F2000, and F1999 option grant levels; stock options outstanding as a percentage of fully diluted shares; option grants to executives vs. non-executive employees.

We found that of the 5,406 US companies that have gone public in US markets since 1980, fifty were responsible for creating 82% of the net wealth. Note that this concentrated success level is consistent with the data derived from our Technology IPO Yearbooks published over the better part of the past decade.

Of the 59 top net wealth-creating non-acquired companies that were founded after 1970, average options outstanding as a percentage of fully diluted shares outstanding were 13% in F2001, vs. 12% in F2000 and 12% in F1999. For this same set of companies in F2001, gross/net options granted represented 4%/1.4% of fully diluted shares outstanding vs. 3%/0.3% in F2000. Finally, the share of stock options granted to senior executives was 21% in F2001, vs. 20% in F2000 and 19% in F1999.

Of the 59 companies, the 29 technology companies compared favorably to the 30 non-tech companies in terms of net wealth creation – at 73% vs. 27%; the breadth of option distribution – with 89% of F2001 options granted to non-executive employees vs. 70% at non-tech companies, but compared unfavorably to non-tech companies on the issue of outstanding stock options as percentage of fully diluted shares outstanding in F2001 – 17% at tech companies vs. 8% non-tech, and with regard to new gross/net options granted in F2001 as a share or fully diluted shares – 6%/2% at tech companies vs. 3%/1% at non-tech companies.
Options Practices: A Look at the Past... (14 pages)