Those options give John the right but not the obligation to purchase 1,000 shares of Company XYZ stock at the market price on the date of the grant.The board formally grants the stock options to John every year at its January board meeting.
Upon receipt of the Notice, RAIT became subject to the procedures set forth in Rule 802.01C of the NYSE Listed Company Manual, and in accordance with such procedures, on or before October 5, 2017, RAIT expects to acknowledge receipt of the Notice and notify the NYSE of its intention to seek to cure the deficiency set forth therein.
He pays the per share exercise price and can turn around and sell those shares on the exchange for each, netting a profit of per share, or ,000.
Granting stock options to employees is a generally accepted and perfectly legal form of compensating employees. Critics of backdating argue that the practice is difficult to detect and thus encourages boards and executives to use it to synthesize more creative compensation packages.
The general reason companies backdate options is to create a lower exercise price, which in turn increases the probability that exercising the options will make more money for the optionee.
Stock prices change, however, and there is no guarantee that any stock price will ever be above the exercise price.