Shmoop Finance

Wait. Employees joined your public company. They got stock options priced with a strike price the day that they joined. That is, whatever the stock price was on the day they started work at the company, that was their strike price (and yes, in some companies, it's the average closing price for that month, but just go with us on this). So the stock was at $212 the day Bob joined. And then, through no fault of his (he's "just" an engineer in the trenches), the stock fell to $80. Bob was thinking, "Gee, my options at a $212 are $130-ish under water; I'll never make money from them. Maybe I should leave to go work for another company." And this is bad. You do not want Bob to leave. If your trench engineers leave, you're out of business, pretty much.

So you reprice Bob's options. That is, you cancel the ones granted to him and issue him new ones, resetting the 4-year vest period. And this is a problem, because Bob had already worked the 8 months. So those were wasted vesting months? Yes, in this scenario. The company needs to grant him a higher number of options now to kinda make up for that lost time.

That's how repricing works today. In the olden days, when stock option grants were way less common, companies could have notionally just changed the strike price of the already vested options to $80 instead of $212, but today, that carries an accounting charge as compensation expense. But with so much room for corruption on that front, we just don't do it any more. And we move on. And hope Bob doesn't quit, with what is now called a Refresher Grant. No relation to Cary.