The entire stock market is taking another drubbing today, and Google is no exception. Its shares tried to rally in the morning, but are now trading below the $329 they closed at yesterday. That’s a key price level Google employees are watching because a huge chunk of their options (1.7 million across the company) were granted with a weighted average exercise price of $329.78. The options are worthless under that price. In addition to that, there are another 5.7 million options that were granted at weighted average exercise prices of $450 and above. (see table below). All told, 61 percent of Google’s stock options granted to employees are currently under water.
The rest of Google’s stock options become worthless at the average exercise prices of $275, $177, and $21 (for pre-IPO employees, who don’t have much to worry about). All of these numbers com from Google’s second quarter 10-Q and don’t reflect any options that may have been granted in the third quarter. (Google’s third-quarter earnings announcement is next week).
Only eight days ago Google’s shares were trading at $411 and three months ago they were above $450. In that time, a lot of paper wealth has disappeared and along with it incentive for many recent hires to stay. Of course, the stock could rally and everything will be honky dory again, but if Google’s market cap is being fundamentally reset along with the rest of the stock market, it could face some serious retention issues in the coming months. The free food and transportation are great perks and all, but let’s get real here. Without the financial upside those stock options represent, Google employees will start looking elsewhere.
It is a danger if the stock does not recover. On the other hand, if the economy truly is spiraling into a recession and capital is drying up for new startups, frustrated Google employees might not have anywhere else to go.
Update: How many Google employees are completely underwater with their options? As I understand it, Google grants stock options to employees during the week they are hired. The last time the stock was this low was almost exactly three years ago. So anyone hired since October, 2005 is pretty much under water. That is 75 percent of all current employees (Google had 5,000 employees three years ago, and now has about 20,000).
Update 2: Google shares rallied a bit at the end of the trading day, closing at $332, just above the watermark for some of those options. Next week is earnings. Will it bring another plunge or a rebound?
We’re all being affected here, not just Google.
No kidding. The entire market is drowning, why are we so focused on google?
Google are the only ones that can save us all!
they(techcrunch) are not just focusing on google, they’re being even more relentless on yahoo.
you all need to relax. out of the past 100 quarters of this country’s economic history, only SIX have been recessionary.
Relax people, relax. What we’re seeing down is mutual funds, hedge funds, and PE money respond to redemption notices. The hedge fund and PE’s usually have a 1-quarter notice for redemptions and it is no surprise that everybody put them in last quarter thinking they’d avoid the slaughter. Guess what – they’re exacerbating the problem.
Because Google is leading the entire Web 2.0 bubble. You can think of Google as a barometer for the entire Internet. No longer will companies be able to exist when their “backup” revenue is “We’ll just sell advertising.”
And as the rest of the economy slides, companies aren’t going to have the capital to do massive ad buys. They are going to have to sit down and think long and hard about what kind of actual ROI they are getting.
do you really come to techcrunch for an expert analysis of the economy?
…and with it goes down the home values in Los Altos and Palo Alto
You’re not affected until you sell.
Agreed, stop bitching about your options!
Indeed shocking… I thought Google can withstand the economic downtime
I see what you’re saying but the stock options at google aren’t really the incentive they once were even if they go back to $400.
Joining Google 10 years ago and getting some of those $21 shares is great, but joining in the last year and having the option of $400 and selling at $450 3/5 years later is no major profit on your investment.
Besides, i’d like to see a company whose stock options still look good in the current climate, Google looks crap yes, but so does everyones.
Ten years ago (well, nine years I suppose), you’d have been getting $0.30 options (the weighted average for pre-IPO options is $21, but there are probably quite a few of the very first employees with options far below that number.
From the chart above, there’s still almost 2MM sub-$100 shares.
stock grants (rather than options) look a whole lot better in the current climate. i believe some of the more established companies (msft, ibm, etc) give grants in lieu of options.
Google gives both stock grants (over time) and options (at hiring).
Yeah after our options were consistantly yielding 0$ we made the change. Doesn’t give you much of an insentive to stay w/ the company long term, which is what the program is intended to do. As a young kid in ‘99 I thought my signing bonus of options would be a down payment on a house in 5 years. Turns out I got $700, company pretty much got me for free.
At least the grants are worth something now.
The job, the work, your colleagues, an enlightened management culture, training opportunities and the perks together should be enough to keep most people working. If as an employer your looking at stock driven options as your main leverage, and you ease up on making the rest of the job worth doing, then this is a shakedown you had coming.
why am i not seeing these market guys jumping out of windows? Is anybody even looking at the suicide rate lately? It can’t be that bad if people are not killing them selves. im so broke i can’t even think of getting a Ipod Touch now that is a problem.
I think you’ve got your priorities all wrong and you’re a sick sadist.
what priorities do i need to have to notice that when the market is really bad people kill them selves and that is just not happening. if anything investors want the market to crash to buy everything back up really cheap. it happen in 2000 and its happening now. they way i see it the worst has happened and now just sit back and watch how the governments of the world join together and have what they been planning for centuries. New World Order.
This is why I focus on salary and only consider stock options as imaginary money and not as any incentive for employment.
we will see $200 next week
Oh please, this is nothing new. Spare the Google ball washing and icon worship. Employees have watched their stock drop in horror for years now. Does anyone remember the Internet Boom or were we all in elementary school ? Good managment tells them not to look as it becomes highly distractive. I shed no tears for google employees.
Yes, really a silly post. In a true depression, having a job becomes your overriding concern, stock options will be the furthest thing from your mind.
Not if you took a below-market salary for those options. Then you’re looking for something that can pay the bills, not something that you’ll see the upside after a couple years of cup-o-noodles.
This is more common in startups than post IPOs like Google, but my point is that your statement is an over-generalization.
If you take a job at below-market salary with the promise of stock options, you’re a sucker. Plain and simple. Stock options are the greatest scam going today.
What? “If you take a below market salary with the promise of options you are an idiot?” WTF??? obviously you have never worked in a start up… wealth is built through ownership, not through pay checks…
Ownership mentality is one of the biggest things I look for when hiring… having a vested interest in the companies performance is a good thing…
If your attitude is that options are for suckers your in the wrong industry my friend…
much better article compared to Mike’s article on yahoo’s $15 price. Thanks Erik for all the detailed numbers.
till people have money can buy it. But nobody has cash now.
Do you know how many people will be out on the street when this is all said and done? Googler’s will still have their jobs with all the perks. BOO FREAKIN HOO
Nice Yahoo chart showing the Google stock price
Is anyone else seeing something really obvious here? The market is heavily depressed right now, and blue chip stocks like Google are far below what they were trading at just a few weeks ago. Am I the only one that sees a load of bargains? It seems like people should be buying rather than running for the hills! For those who didn’t get in on Google stock at $100 per share, this is an opportunity to pick up some for cheap.
The question is not whether there are bargains compared to a number of weeks ago, it’s whether there are bargains compared to the future. Nobody knows how “heavily depressed” the market is going to get, and picking the right bottom to buy at is a gambler’s game right now. But hey, if you’re comfortable catching a falling knife, let’s hear what positions you’ve taken this week.
If you’re right, you’ll make a lot of money. If you’re wrong its called a “value trap”. With the VIX hitting 70, I would definitely not recommend single stock purchase on value pricing. Unless you really know a company well, if you are going to buy the market employ asset allocation and average in. The S&P 500 at 2002 levels is very appealing.
“if the economy truly is spiraling into a recession”.
erick…that’s sarcasm right? the debate about whether or not we were in a recession should have been ended 6-8 months ago. all semantics maybe…but…recession. yikes.
A recession “occurs when real gross domestic product (GDP) growth is negative for two or more consecutive quarters.” rGDP grew 2.8% in Q208… I’m just saying…
oh right. forgot about that.
I think this is an old definition, a recession is no longer determined by these metrics.
Right, and if the rGDP seems to be flagging we’ll just goose it up with some fudged Imputed Income figures or something. GDP is a fairly fake number, basing a definition of “recession” on it even more so. But hey, if economic genius Bush says we aren’t in a recession because the loopy definition he uses says we aren’t (like torture), then who am I to question? I don’t even satisfy the basic requirement for concern by having worked at Goldman Sachs.
http://www.shad...s_republish#gdp
I guess we will see few americans in that “top10 richest people in the world” next time…the google boys each lost some billions in the last few days
In case you had not noticed, Europe and Asia are being hit MUCH HARDER than the U.S. is. If anything, you’ll see more Americans on that list, just less dollar signs.
> Without the financial upside those stock options represent, Google employees will start looking elsewhere.
Then they’re crap employees, to be honest, and I doubt Google has a lot of those. If the stock options are the only thing keeping you in a job then you’re in the job for the wrong reason — and the company was wrong in hiring you.
The employees at Google who have options and are significant to Google’s success aren’t going anywhere. Besides the other benefits Google offers, an above average salary, great management, etc., there’s the undeniable prestige.
Come on, TechCrunch, we expect better writing than this… this FUD.
“Then they’re crap employees, to be honest”
Yeah, wanting to work to, you know, actually make money is such an outdated concept.
He’s saying that if they’re working solely for Google solely because of what Google’s STOCK OPTIONS CAN OFFER THEM instead of what Google AS A WHOLE CAN OFFER THEM then they’re crap employees. This is a thesis that I agree with – if you work for a specific company solely for a financial incentive then you’re probably not the best employee. Finance should come second to believing in the company’s mission and its vision.
“If you work for a specific company solely for a financial incentive then you’re probably not the best employee.”
Why else would I work for a specific company? For that matter, why would I work at all? That’s the dumbest comment yet!
“Finance should come second to believing in the company’s mission and its vision.”
Your naivete is touching.
Fear not…your options will probably be rebased at a lower price.
I doubt that many will be looking elsewhere even with options under water…. a jog with cash is good for the short term…
Techcrunch should be sued into oblivion for fearmongering.
If I were google at least I would spend a couple millions in lawyers you couldn’t afford mike huh?
This is such a ridiculous post I just have to vent…
Google employees with strike prices of ~$300 did not come into Google taking a risk with their financial or career future. They have stable, high-paying jobs with a company that will certainly be around for the long-term and will weather the current storm. They are the LUCKY ones in this storm, not the ones we need to be feeling sorry for because their stock options are under water.
What about the guys in the startups that have taken real risks, lower compensation packages with the hope of a windfall when their company makes it, and now have to question the long-term viability of their company and their jobs? That’s where the real stories are.
I’m amazed that such an unenlightening post makes it into TC. What next? How about an eye-opening story about how millions of people lost money in their mutual funds this week?
Employee’s at google “frustrated?” Come on if thats the case they can go and get a massage and then maybe go and have a gourmet meal to calm them down. Gimme a break google employees have good paying jobs w/perks even if their options are underwater. As Nitin mentioned it those of us who took the risk to go to a start up that really have to worry about whats coming down the pipe.
Fine points Nitin. Are you located in the Bay Area? I checked your site and I need you to ping me back. Please do email me at allan [@] allantyoung [dot] com
Don’t be a playa hater.
Small Startups are getting killed {seesmic_video:{”url_thumbnail”:{”value”:”http://t.seesmic.com/thumbnail/x8O8FCx8kM_th1.jpg”}”title”:{”value”:”Small Startups are getting killed ”}”videoUri”:{”value”:”http://www.seesmic.com/video/2E3WkY1AhO”}}}
I second this!
When almost all tech stocks sink, i dont know why techcrunch make so much fuss about GOOG stock. All tech companies had given options which are under water. Googcrunch would be a better name for techcrunch as it does ALWAYS talk about google as if Google is the only tech company in this world.
Access http://finance....p;c=YHOO&c=^IXIC
Over the last three months, the Dow Jones is outperforming NASDAQ which is outperforming IBM, Google, EBay, Dell, Apple and Sun, in that order. EBay announced a reduction of employees and contractors and a hiring freeze, reducing staff from its current level from 15,000 to less than 14,000. (I’ve no idea why it takes 15,000 people to run EBay.)
Google is only very slightly outperforming EBay but Google is meeting earnings expectations based on booked revenue from penis pills, Florida real estate and SUVs but this revenue is never going to be collected. It is just bad debt which hasn’t been written off. Google’s also had a bozo explosion of do-nothing project managers. Which means there’s a glut of middle management in charge of go-nowhere “strategic” projects which could be cancelled at very short notice.
Microsoft and Oracle are outperforming this sinking market, partly because the threat of cost-cutting, open source competitors has already been factored into their share prices. However, I’d be most concerned if I was at Apple, Yahoo or Sun. A 10% cut in the workforce looks like an optimistic outcome. Acquisition and a 50% cut is becoming more likely.
This post is foolish. Get outside the Valley every once in awhile Mikey.
Did you see Arrington listed as the author? You didn’t even look did you? What a waste.
Why so many complainers?
Just goes to show.. NEVER consider options as anything but toilet paper. I worked through the first bubble and had nothing to show for it.. unlike the founders of our company of course; somehow they came out much richer after the company was purchased, but the little people ‘conveniently’ had restrictions on selling their shares until just after the parent company’s stock peaked, then crashed. Typical. Yeah I’m a bit bitter.
“The entire stock market is taking another drubbing today, and Google is no exception. Its shares tried to rally in the morning, but are now trading below the $329 they closed at yesterday. That’s a key price level Google employees are watching because a huge chunk of their options (1.7 million across the company) were granted with a weighted average exercise price of $329.78. The options are worthless under that price. ”
Options are not “worthless” just because their exercise price is less than the current price of the stock.
Take an example: Suppose Google offers to sell to you, today, a 10 year stock option (that is, it can be exercised at any time in the next 10 years) to purchase up to a millions shares of Google stock at $329.78–the price Google stock is trading for today–for, say, $100. Would you buy this option? You’d be an idiot not to. So it’s not worth nothing: it’s worth at least $100. It might even be worth $100k, or $10k. Who knows. Formulas like Black-Scholes try to figure this out, but it’s elementary that a right to buy stock is not equal to the difference between the exercise price and the current price of the underlying security. This is because holding the option costs you nothing, so there’s no downside; but there’s a potential upside (if the stock rises above the exercise price, in the next 10 years). An instrument that has no downside but a potentially large upside is of course worth something.
Options are not “worthless” just because their exercise price is less than the current price of the stock.
Yes they are. A person on the street can buy a call option for the same price that the employee would “pay” for his worthless options.
I’ve been there and done that … won’t do it again!
I was with TCI/At&t in 2000! What a crappy year. We lost everything shares, 401k, and our jobs.
I’ll be praying for you, seriously.
Recently i have been quietly building up resources and internet real estate. More to come.
Peace,
Michael
“…everything will be honky dory again”. Does this mean that any recovery in the share price will only benefit the white folks at Google?
And where else might these google employees go? The pastures aren’t any greener anywhere else.
$22 a share? Almost double it’s current price? I think not. Yahoo should have sold but they didn’t. 20/20 hindsight blah blah blah.
Microsoft has the same problem(s) as Yahoo! – execution. What would they do with Y! besides just let it run it’s disjointed course, as it is doing now.
You forget about refresher stock options. Anyone who gets refreshers at this time gets them at the current low prices.
Let me beat Mike to the punch… You don’t like it? Stop coming. Mike makes money every time you read an article or refresh the comments, and then even more when you leave a comment and then more the more as you follow the comments. He’s laughing all the way to the bank. Stupid posts are just bait and controversial posts simply lead to more views and more comments (aka even more views) which simply makes him more money.
If you want to send a message, delete the bookmark.
The irony of people complaining about the quality of a contributor’s niche-market blog post as the financial world is imploding is just incredible…. it’s like everyone is wearing matching bathing suits and lip-syncing Journey, and they don’t even know it.
Sucks to have Google options as of late huh? This will actually turn out to be a great employee retention tool for Google because people always believe that the stock price will come up someday. It will be quite some time though if you ask Emperor Steve.
Disaffected Googlers can always come work for Microsoft Live Search at the Powerset offices in SF. Same great startup flavor, but now with more financial security.
Haha. What financial security? The whole live family of products have been losing a lot of money for years. Pressure to cut the losses will only increase.
I’m not invloved in the stock market at all. I live in Europe (France). Here, college and education is free. So is medical care and health insurance. i’m a teacher, so i have a job for life, as is very common for state employees in Europe. I’m happy. Thats the most important thing.
Great!
How are your teeth doing? Last I checked, the wait on basic dentistry was over 3 months. Can’t stand the pain that long? It’s OK…they sell pliers specifically for pulling your own teeth at the local drug-store.
Yeah… things look “swell”.
Lol – well, im not saying one system is better over another, both have their advantages and disadvantages. However, what you’re saying is absolutely not true. France in particular has one of the best health care systems in the world. If i recall, Sweden and Norway are first followed by France and Germany in terms of Quality and Access. I mean, all you have to do is think about it logically. If what you are saying was true, then it would already be a well known fact that at least 50% of Europeans would be walking around toothless, and in a state of utter physical wreckage, just like in the middle-ages. this is obviously not true, hence what you are saying is obviously totally wrong.
However, it is true that getting investement and starting a business is more difficult in Europe. As i said, there are good sides and bad.
Living the French dream! I’m happy for you
http://www.tech...e-millionaires/ not so much
OMG Erick, now what?! Your sweetheart is in trouble again!
sorry – I really meant to link to http://www.tech...muzzle-blodget/ and http://www.tech...iggest-company/
Um, maybe I’m missing something, but those price levels you quoted are meaningless. Like you said, they’re average prices. Your article implies that 1.7M options have a strike price of 329, which is just wrong. EVeryone has different prices. The fact that the sheet you quoted grouped them into hundreds and computed a weighted average for each range is irrelevant.
And like others have said, obviously the options still have value. For example, January 2010 $330 call options are currently trading at $80. Just because the price is below $330 doesn’t mean the option is worthless. It’s just not in the money now. And since they can’t be exercised yet anyway if they’re not vested, this is largely irrelevant too.
And finally, wasn’t Google setting up some market where options could be sold (i.e. they wouldn’t have to be exercised)? And if I remember correctly, unvested options could also be sold. Might be wrong about that.
Any way you slice it though, the options are still very valuable and this article is just trying to create controversy where there isn’t any.
For example, January 2010 $330 call options are currently trading at $80. Just because the price is below $330 doesn’t mean the option is worthless.
Employees have call options? And they can sell them as such? Wow I never knew.
Yes, they can sell their options. I don’t know how many of these are eligible however: http://www.iht....ness/google.php
And I’m not saying that they have call options (literally), but they basically are, right? An exercise price of $330 on an employee option and strike price of $330 on a call option are basically the same thing.
Anyway the point was that they have value.
Is there stagnation at Google, or are the employees just quietly hard at work on fantastic concepts that take time? I suspect they are, but gosh it sure is foggy there on the San Francisco Bay recently; it think it’s possible many of today’s trepidatious investors have lost sight of the ship. Alas, we all know the ship hasn’t left the harbor, but shucks a peek sure would be nice to at least confirm her prop isn’t cavitating and her stern is pointed in the right direction.
What happened to GrandCentral, captain? Tossed overboard?
The G-phone! Aye, she put up quite a fight, didn’t she? But when you reeled her in, ’twas a just a thick, tangled mess of old junk tossed overboard by some sailor last season. Arrrr.
And PageRank (or is it “WikiRank” now? I can’t tell) — what’s the deal? Is PageRank an albatross? I think it is, I think you need to get rid of it. Search results involving hot political topics ALWAYS seem to tilt left-wing. I am not left wing. Wikipedia and Washington/Huffington Post aren’t what I’m looking for. See where I’m going with this, Google? Yes, why not study my behavior just a little more carefully so I don’t have to walk through that stinky shit to get to the good stuff? Why not invest an extra $500 million in quantum computing and spintronics, instead of space cameras, so that you may spawn the breakthroughs in real-time computing and A.I. necessary for breaktroughs in the study of language and human behavior, so that search results get more personalized, instead of broader (PageRank), over time?
“Search results involving hot political topics ALWAYS seem to tilt left-wing.”
Must be because people in the flyover states don’t know how to use the internets and post their opinions.
Google is OVERVALUE.
For certain types of Google options, options can be sold as *options* instead of being exercised. So even if the stock is one dollar under your strike price, there’s a bunch of value to the option.
Really? all employee stock options I’ve seen are non-transferable (so the only way to cash in is to exercise them). Are Google’s different?
Google’s standard form of stock option agreement is for NON-TRANSFERABLE options (transfer includes sales as well as gifts). Google can waive this and allow an option holder to transfer her or his options, but only after notice is provided and Google grants consent. Here’s the language:
“This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee [b]only by the Optionee[/b]. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.”
Google’s employees have a transferrable stock option plan, so their options can be sold (essentially) on the options market. Even someone with a strike price of $500 would be able to sell their options for about $35 (as of Friday).
See http://googlebl...ck-options.html for the official word, and see http://finance....G&m=2010-01 for the prices.
1. They can still sell their options.
2. Maybe now they’ll spend less time at cushy team off-sites and start working harder to get the stock price up.
3. Where else are they gonna go? Facebook? haha…
4. Google still throws off cash like ben bernanke in a helicopter – you’d be a moron to leave a company like that in this downturn – any attrition at Google is likely to just get rid of the stupidest dead weight at the company.
“Where else are they gonna go? Facebook? haha…” Pleaasee… I mean facebook has 0 innovation.
wow, this makes me feel really, really sad for all those G-employees.
Can we get some perspective please?
http://woodrow....runch-focu.html
Seriously, I would fire the first 10 Googlers I heard complain about their option strikes on principle.
I work at Google. My options are underwater. I don’t care at all.
The money, the options, and the perks are nice, but the vast majority of people who work here aren’t here for those things. We’re here because of the interesting problems, the smart people, the huge data sets, and the enormously powerful, global computing infrastructure. Those things aren’t going anywhere. This is a geek’s paradise, and the stock will take care of itself eventually.
Bravo!
Google makes shieety products. What they come out with, I wouldn’t want to use. The only good thing Google has is the search. Beyond that, every other services sck and they think they are smart. Bunch of arrogants.
maps is nice.
Yeah ! I mean seriously. How difficult is it to create Google docs? One socket program that has been used for years forms the complete push/synch functionality and they call it a HUGE innovation.
Google earth – They brought a company that was doing it already
Google Street View – Panaromia remodelled.
Google Maps – Yeah Original.
Google Search – yeah original (Original enhancements and ideas)
. Agreed.
But microsoft isnt too good either.. They might build gud products for a company of that size(Its hard to move when you are fat) but the kind of lock ins they create is too much for any sensible computer user…
“The money, the options, and the perks are nice, but the vast majority of people who work here aren’t here for those things.”
tell that to hundreds of Google employees with families to feed you big dope.
not many companies are “not” affected by this economic downfall and I guess big G is no exception to that
obviously TC has to report SOMETHING
All the rain drop bubbles are bursting all at the same time. WOW.
bunch of babies! we are have the same issues, the newer google folks dont deserve that much upside anyways…they simply took a save ship. now is the time for talented googlers to jump and join earlier stage stuff
wow! Certainly wouldn’t have seen this coming 6 months ago!
http://www.zenbylunch.com
Maybe this could prompt these supposed smart people to be innovative. Otherwise they’ll lose another beach ball from their playground
i hope so . i am sick of all the twitter, and youtube clones.