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Top Articles - How Steve Jobs Personally Benefited from Options Backdating at Apple Computer
Apple Computer stock dropped recently after the San Francisco Recorder, a legal newspaper, said Federal prosecutors are examining Apple’s stock option documents to decide whether to file criminal charges. That was an escalation from the previous level of expectations. Some of the stock’s cheerleaders are saying it won’t hurt Apple or Steve Jobs, and there is not a chance he will be lea
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
ving Apple.
I think that’s wrong, or at least expresses a lot more certainty than any outsider could know. The other, quieter announcement was that Steve Jobs has “decided” that he needs to hire his own attorney to deal with the SEC and the Justice Department from now on. Up to now, he has been represented by the company’s outside law firm.
One of the big advantages of being
I think that’s wrong, or at least expresses a lot more certainty than any outsider could know. The other, quieter announcement was that Steve Jobs has “decided” that he needs to hire his own attorney to deal with the SEC and the Justice Department from now on. Up to now, he has been represented by the company’s outside law firm.
One of the big advantages of being
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
in and around Silicon Valley for 25 years is the d?j? vu effect. I have seen this before. CEOs usually don’t hire their own counsel until the company counsel tells them that the company’s interests and the CEO’s interests have diverged. In other words, if Apple’s counsel has seen enough to believe the company was hurt and the CEO was involved in it, they have the potential of represen
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
ing the company in a lawsuit against the CEO, and therefore have to advise him that they can no longer represent him..
Now that the company has admitted Jobs knew about the backdating, I think the next announcement we will see is that Steve Jobs has been notified he is the target of a criminal investigation, and then the Board will have a very difficult time doing anything other than suspe
Now that the company has admitted Jobs knew about the backdating, I think the next announcement we will see is that Steve Jobs has been notified he is the target of a criminal investigation, and then the Board will have a very difficult time doing anything other than suspe
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
ding him until the investigation is over.
I think these things because I have been through the numbers, including what I believe is the largest stock option grant ever, to Steve Jobs in January 2000.
Overall, since the current proxy disclosure rules started in 1994, Apple made 15 rounds of options grants through their September, 2002 fiscal year. If you look at the price of those gra
I think these things because I have been through the numbers, including what I believe is the largest stock option grant ever, to Steve Jobs in January 2000.
Overall, since the current proxy disclosure rules started in 1994, Apple made 15 rounds of options grants through their September, 2002 fiscal year. If you look at the price of those gra
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
ts compared to the annual range of the stock for the six months prior to the grant and the six months following the grant, all 15 should average somewhere around the 50th percentile of the annual range. Some grants made right before the stock declined would be in higher percentiles, while others made right before the stock shot up would be in lower percentiles. But averaging all 15 rounds tog
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
ther, it seems reasonable to expect the 50th percentile if no funny business was going on.
Apple’s grants average in the 15th or 16th percentile. That is powerful evidence that a company backdated, or at least granted options right before they had reason to believe the stock was going to jump. Of course, Apple has now admitted that they backdated options, and Jobs knew about it
Ther
Apple’s grants average in the 15th or 16th percentile. That is powerful evidence that a company backdated, or at least granted options right before they had reason to believe the stock was going to jump. Of course, Apple has now admitted that they backdated options, and Jobs knew about it
Ther
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
e are three transactions the SEC and Justice Department probably are looking at for backdating. One was on July 11, 1997, when Apple repriced options and executives turned in old options with a $7.44 strike price for an equal number of new options with a $3.31 strike price. There were only two other days in the 1997 fiscal year when the stock closed at a lower price. On August 6, only 26 day
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
after the repricing date, the stock jumped 33% and then added another 11% on August 7. The question is whether someone decided on August 8 that July 11 would have been a great day to make the repricing effective.
A second case was January 17, 2001, when four top officers (not including Jobs) got options totaling two million shares at $8.41 a share. A few months before, on the last busin
A second case was January 17, 2001, when four top officers (not including Jobs) got options totaling two million shares at $8.41 a share. A few months before, on the last busin
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
ss day of the 2000 fiscal year, September 29, AAPL was cut in half when they preannounced an earnings shortfall. It kept dropping to the $8.41 option price, and then staged a nearly 60% rally in four months.
The third and most serous case is the giant 40 million share (split-adjusted) grant at $21.80 a share to Jobs on January 12, 2000. This one is a bit tricky, as the company has said J
The third and most serous case is the giant 40 million share (split-adjusted) grant at $21.80 a share to Jobs on January 12, 2000. This one is a bit tricky, as the company has said J
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
bs “didn’t benefit” because the stock eventually went below the option price. But here’s what really happened.
In the previous 26 trading days, AAPL fell 26%. Jobs then got his grant on the exact day the stock hit its low, and the stock rose 65% in the following 10 weeks. The issue, again, is whether someone decided in February or March that January 12 was a great day to price the boss’
In the previous 26 trading days, AAPL fell 26%. Jobs then got his grant on the exact day the stock hit its low, and the stock rose 65% in the following 10 weeks. The issue, again, is whether someone decided in February or March that January 12 was a great day to price the boss’
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
options, it being the lowest price for many months. AAPL stock eventually went below the option price, and the options were cancelled. The company says due to “irregularities in the grants, the options were canceled and resulted in no financial gain to the CEO.”
Oh, really? This bunch of options would have expired in January 2010. Apple’s stock kept declining in the tech bear market, s
Oh, really? This bunch of options would have expired in January 2010. Apple’s stock kept declining in the tech bear market, s
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
the Board gave him 10-year options on another 15 million shares in October 2001. But the second batch went underwater, too, and on March 19, 2003, Jobs “voluntarily cancelled” all 55 million options. That’s why the company claims there was no financial benefit to him from the perfectly-timed 40 million share grant.
But the Board of Directors Compensation Committee report for that year
But the Board of Directors Compensation Committee report for that year
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
isclosed that “in exchange for his cancelled options” Jobs was given 10 million split-adjusted shares worth around $75 million at the time. They were restricted from sale for three years, and when they became free to trade on March 19, 2006, they were worth $640 million. Not bad!
Here’s the rub, and I am indebted to compensation consultant Graef Crystal for doing the calculations. How d
Here’s the rub, and I am indebted to compensation consultant Graef Crystal for doing the calculations. How d
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
id Apple’s Board decide on the number 10 million shares? Almost certainly, they used an options pricing model to calculate the current value of the options, which still had seven and eight years to expiration. Even though they were underwater on that day, the long time to expiration gave them value. Crystal used the Black-Scholes option pricing model to calculate the current value of the 55
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
illion options: $77 million. That’s close enough to $75 million to believe this was their methodology.
But remember that the value of the options also depends on their strike price, and the very favorable strike price on the first 40 million grant raised their value quite a bit. If the strike prices of the two contracts had been set at the 50th percentile of the daily closing prices in their
But remember that the value of the options also depends on their strike price, and the very favorable strike price on the first 40 million grant raised their value quite a bit. If the strike prices of the two contracts had been set at the 50th percentile of the daily closing prices in their
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
respective fiscal years, the calculated value on March 19, 2003 would have been $10 million less, around $67 million. So the Board might have given him, say, $65 million in shares instead of $75 million, or 8.7 million shares instead of 10 million. Those 8.7 million shares would have been worth $557 million when the sale restrictions expired on March 19, 2006, instead of $640 million. That’s
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
an $83 million difference.
Yet in an October 4, 2006 filing with the SEC, Apple said: “In a few instances, Apple CEO Steve Jobs was aware that favorable grant dates had been selected, but he did not receive or otherwise benefit from these grants and was unaware of the accounting implications.” He didn’t receive the grants? He didn’t benefit from the grants? What about the $83 million? G
Yet in an October 4, 2006 filing with the SEC, Apple said: “In a few instances, Apple CEO Steve Jobs was aware that favorable grant dates had been selected, but he did not receive or otherwise benefit from these grants and was unaware of the accounting implications.” He didn’t receive the grants? He didn’t benefit from the grants? What about the $83 million? G
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
t real.
It now appears that the paper trail around the October 2001 grant (7.5 million shares at the time; 15 million split-adjusted) was falsified. Recently, Apple has been saying that, yes, there was something wrong with the first and maybe both of these grants, but Jobs was not aware of the “irregularities.” But Jobs also was CEO of Pixar at the same time, which also appears to have b
It now appears that the paper trail around the October 2001 grant (7.5 million shares at the time; 15 million split-adjusted) was falsified. Recently, Apple has been saying that, yes, there was something wrong with the first and maybe both of these grants, but Jobs was not aware of the “irregularities.” But Jobs also was CEO of Pixar at the same time, which also appears to have b
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
ckdated stock options. So he is the only CEO of two companies caught in this scandal, and it looks to me like someone on the East Coast has decided to teach the freewheeling entrepreneurs on the West Coast a little lesson by nailing a very big target. I still think there is a substantial risk that Jobs will be forced to leave Apple, and therefore it is too risky to step into the stock yet.
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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