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Apple stock fell 9 percent based on the initial news about the scandal, although it didn’t take long for things to rebound. A shiny new product Jobs would show off for the first time less than two weeks later, in January 2007.As “[P]erhaps the biggest catalyst for Apple’s stock could be the release of a cell phone, which has been widely anticipated for months.News of the Apple backdating scandal didn’t find its way into the public consciousness until late 2006.
Some companies set the grant date at the lowest point within a 30-day window ending on the actual grant date, thereby virtually guaranteeing a below market price option.
If the stock dropped below /share, the stock would be "under water"; therefore, the option would not be exercised, since the stock price is lower than the cost of exercising the option.
Unlike the abusive corporate tax shelter ploys which often involve complex manipulation of a transaction to achieve tax results that are inconsistent with the economic reality of the deal, stock option backdating is a relatively crude device: A corporation merely changes the date that a stock option was actually granted to an earlier time when the stock price was lower.
It took until December that year until terms were finally agreed upon, at which point Apple’s stock price was .01.
Backdating was then carried out to give Jobs a lower share price which, on paper, made him million richer.
However, Apple’s former CFO Fred Anderson, who was on Apple’s board, and general counsel Nancy Heinen, did have complaints made against them.