December 28, 2006 As the rest of the country enjoys a well-deserved vacation, Apple is embroiled in a “background date” scandal.
The news, focused on the dubious allotment of shares to Steve Jobs, leads to a drop in Apple stock prices. Some people even suggest that Jobs might have to step down as Apple CEO. Fortunately, that is not happening.
Background of Apple stocks backwards
Dating stock options backwards refers to the practice of writing stock option agreements to make it look like they were granted earlier than they are.
Companies often tie compensation to executives for stock options. This gives executives the opportunity to buy a certain amount of shares at a set price. The lower this “strike price”, the cheaper the executive can buy shares. When these options become available after a certain period of time, the executive can sell them at the current share price. That’s a nice bonus if the company has increased in value.
Dating backwards is legal as long as it is published correctly. When this is not the case – and thus becomes the information that investors lack – the practice violates the law.
According to Forbes (which shattered the story of the past date), Jobs was granted 7.5 million shares approved at Apple’s board meeting on August 29, 2001. At the time, Apple’s share price was $ 17.83. However, Jobs continued to argue about the point at which they could leave. As a result, Apple missed the deadlines it had to submit to the Securities and Exchange Commission.
It was until December of that year that the terms were finally agreed upon, at which point Apple’s share price was $ 21.01. A date was then set back to give Jobs a lower share price, which, on paper, made him $ 20 million richer.
News of Apple’s background date scandal did not find its way into the public until late 2006. The company was the most prominent of the few to engage in similar behavior, including Broadcom, Novell, McAfee and CNET.
Jobs was never in real danger of losing his job. However, the scandal was certainly enough to cause a little concern in Apple, given the key role that Jobs has played in the company’s turnaround since his return a decade earlier. The incident also called into question people’s perception of Apple as a “good guy” and Jobs as a CEO who was not hungry for money.
(Over the next year, this perception that Apple was no longer a bad outsider fighting the establishment would be challenged again when Apple sued the blogger for reporting on the company’s trade secrets.)
Finally, the SEC announced in April 2007 that it would not initiate proceedings against Apple. This was partly because the company was so quick to launch an internal investigation into the stock scandal. However, Apple’s former chief financial officer Fred Anderson, who was on Apple’s board, and chief adviser Nancy Heinen had complaints against them. In the end, Anderson resigned, and Heinen paid a $ 2.2 million fine without admitting responsibility.
How the stock scandal affected Apple
Apple also paid $ 14 million in damages. And Apple shares fell 9% based on initial news of the scandal, although it didn’t take long for things to recover. The reason? The great new product Jobs would be shown for the first time less than two weeks later, in January 2007. CNN Money he wrote in his December 28 story, “Apple: Is Jobs’ Business at Risk?”:
“[P]perhaps the biggest catalyst for Apple shares could be the release of a mobile phone, which has been widely awaited for months. Some have speculated that Apple could unveil its phone at the Macworld Expo, an event held every January that Apple has often used to introduce new products. Macworld will run from January 8 to 12 in San Francisco. ”
If people were looking for something to reverse Apple stock, the iPhone debut was definitely that. And to a greater extent than anyone imagined.
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