Stock Specialist

Hot Jobs presents

May 17, 2000

Hotjobs presents Stock Specialist Ted Buyniski, who discusses in an online interview issues concerning stocks, stock options, the Internet, investing, and shares.

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HotJobs: Welcome to HotJobs.com's bi-weekly event! We're glad you're here, because that means you're ready to take control of your career. Tonight we'll be talking to leading compensation consulting firm iQuantic's stock specialist Ted Buyniski about stock options, what they are, and what they mean to the worker in the current economy. Welcome Ted Buyniski.

Ted: Good evening everyone. We are here this evening to talk about stock options which, as you may already know or may be seeking to find out, are the primary driver in people's reward opportunities in the new economy. Whether you are in a brand new start up or an established technology firm, stock options are a prime component if not the prime component, of your pay package. With those as opening remarks, let me toss it open to the people here this evening. Take your questions and address your issues.

Nancy: What is an option worth? Is a private company's option worth more than a public company's?

Ted: An option is worth ultimately, what the stock itself is worth in the marketplace. When you look at your option, the value of your option is determined solely by the appreciation of the company stock over the price at which you received your option. Looking at a private company versus a public company, what you have to look at is what is the appreciation potential of your stock and what the amount of risk is. If you are with a private start-up company and there's one chance it's going to be the next Redhat and 50 chances it's going to fail, that option may not be worth as much as one option in Microsoft.

Warren: How important is the number of options I get?

Ted: The number of options you get is only one piece of the equation. As important as the number of options you get is the price of the options. And the amount of the company represented by the options. If I were to say, "Warren, here are 10,000 options in Company A, and here are 1,000 options in Company B." By itself, you can't tell which is a better deal. Now if I tell you that the 10,000 options in Company A are on a $10 stock that is going to appreciate 20 percent over the next year, and the 1,000 options are on a $200 stock that is going to appreciate 30 percent over the next year, the 1,000 options clearly become a better deal. You have to look at the overall value of a grant which can either be expressed as a face value, the number of options times the strike price, which is the option price, or as the potential future value which is what do I expect those options to be worth when I exercise them as opposed to what stock price is today, when I receive the options.

Mollie: How many options should I expect in a new job? Will I get the same number every year?

Ted: Mollie, the number of options you can expect in a new job will vary from company to company. Typically, if you work for a company that is in a pre-IPO stage you'll receive options when you join and then you may receive options if you are promoted or you do something exceptional. If you are in a public company, you will probably receive options when you join and there is a strong likelihood that you would receive options each year thereafter. But as to the number of options, two considerations - One, what level are you going into the company at and, two, as we discussed in the previous question, how much value, how much opportunity is represented by each option that a company gives you. Two companies may be delivering the same value but because of stock price and performance expectations, one company may need far more shares to deliver that same value.

Julie: Should I expect options annually?

Ted: Whether you should expect options annually, that is a point you need to discuss with the company when they are hiring you. If you look at the broad range of technology companies, the majority of companies give the majority of people options on an annual basis. But, and this is an important 'but', not every company gives every employee options every year. Some companies will give everybody a little bit every year, what we call the peanut butter approach. Others will make all employees eligible for options but only give options to the better performers. And some companies will only make periodic option grants. So, to answer your question, this is something you need to specifically discuss with the company when they are hiring you.

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