Professor Bainbridge...on law, politics, religion, culture & food

Options as incentive has always been more corporate spin than reality.  This “scandal” came about because stock was used as cash, not instead of cash.  If you have the time take a look at thestreet.com piece on the DVAX secondary.  An sampling:  “Some investors in Dynavax (DVAX) must be marveling at their good fortune, at least those who were able to buy shares of the Berkeley, Calif.-based biotech company at $4.40 in a hastily arranged stock offering on Wednesday, Oct. 4. Imagine their glee when the stock opened Thursday at $6.35 and closed at $7.70 after a New England Journal of Medicine article was released Wednesday night stating that Dynavax’s allergy therapy “appeared to offer long-term clinical efficacy in the treatment of ragweed allergic rhinitis.” A 75% one-day gain. As my boss on the trading desk used to say, “That’s some sweet corn!"… The NEJM alerts the scientific media on Fridays to what it will publish in the coming week’s edition, and journal subscribers get the news on Tuesdays, rather than Wednesdays. Dynavax acknowledged it knew as early as Friday that the positive article would be published Wednesday. It also acknowledged that the stock offering deal was put together overnight.... Dynavax’s Chief Financial Officer Deborah Smeltzer says, “You never know what kind of impact a publication will have.” The financing transaction occurred quickly because “we had very specific interest from key investors,” according to the CFO… The deal smells fishy,” says one institutional analyst who wishes to remain anonymous and who doesn’t own shares of the company. “Obviously, they [Dynavax] knew the study was going to be published,” he says. “It seems funny to raise money the night before.” Looks like something you would find interesting.

Simply unbelievable.  Did the clever planners also devise some means for avoiding Estate Taxes as well?

C’mon people, it’s just this kind of thinking outside the...um...box which keeps America great.

Have you no respect for the dead??  And for your information they are called Zombie Options.

Backdated stock options have always reminded me of the “Greatest Marksman in the World” Joke.  A reporter goes to interview the greatest marksman in the world.  When he gets to the guy’s house, it is surrounded by trees, barrels, bales of hay, etc. - each with one shot dead-centering the bullseye.

The reporter asks: “That’s incredible - how do you do it?

The marksman replies: “Easy - I just shoot something, then I go and paint a bullseye around the bullet hole!”

This whole idea of paying executives based on increased stock values is to my mind suspect, anyway, as stock price isn’t always a good way of measuring whether a company is successful.  Can anyone say “dot.com?”

"Can anyone say “dot.com?"” They went out of business, no? In the Long run the market gets it right.  Short run, well, you know what they say about a fool and his money…