Knology Resets Underwater Options5/16/2004 8:00 PM Eastern
Newly public Knology Inc., the West Point, Ga.-based broadband services provider, approved a plan to reprice stock options for its employees — a move that will buoy hundreds of thousands of options that have sunk underwater since its December initial public offering, but could dilute existing shareholders.
Knology approved the plan at its annual shareholder meeting earlier this month. It would reprice more than 900,000 option shares that had been at $18.70 each — substantially above Knology’s current trading price of $6.70 per share — to the current value of the stock at the time the options are exercised. Of those option shares, 656,000 are currently exercisable.
Knology said in its proxy statement the options were issued prior to the IPO, and were priced at a level that at the time was considered to be fair market value.
In its proxy statement, Knology admitted the repricing would have a dilutive effect on shareholders.
Knology currently has about 21 million shares outstanding, so putting another 656,000 shares on the market would represent about 3% of its float. The stock has declined about 25% from its December IPO price of $9 per share.
According to documents filed with the Securities and Exchange Commission on May 11, 15 Knology officers and directors took advantage of the repricing, exchanging options that had a strike price of $18.70 for options that had a strike price of $6.87, the closing price of the stock on May 7.
None of those executives sold their stock: most of the options vested immediately and expire between 2004 and 2013. But Knology’s share price fell 12.3% (96 cents) between its May 4 annual meeting when the exchange was approved and May 7 when the 15 executives made the swap. The stock continued to drop, closing at $6.70 on May 11.
|Options exchange at Knology:|
|Name||Title||Number of options exchanged|
|Source: SEC filings
|Anthony Palermo||VP Operations and Marketing||58,022|
|Robert Mills||Chief Financial Officer||55,294|
|Bret McCants||VP Construction||39,439|
|Marcus Luke||Chief Technology Officer||23,298|
|Felix Boccucci||VP Business Development||22,360|
|Chad Wachter||VP General Counsel and Secretary||16,900|
|Richard Perkins||VP IT and Billing||15,000|
|Andrew Sivell||VP Network Operations||12,677|
|Campbell Lanier III||Director||5,124|