Tuesday, 18 May 2010

Apple Picking Jobs

It surely happens to all of us traders at some time, but the next time you feel bad about bailing out of a position that appears to be a lost cause, going red-all-over, only to watch your original position recover and go on to win, spare a thought for Apple’s Steve Jobs.

As the Yahoo! Finance page today tells the story:

Jobs and other employees were feeling the pinch. Stock options they had been granted during the boom now seemed completely worthless. After all, Apple stock would have to climb all the way back up to those giddy heights before the options even started to show a profit again.

So Apple employees were allowed to swap many of their options for a smaller number that became valuable at a lower price.

As for Jobs: He volunteered to cancel all his options in return for a far smaller number of shares, worth about $75 million at the time. The trade made sense -- unless Apple boomed again.


The shares Jobs received are worth $2.5 billion at today's stratospheric prices.
But what would those options have been worth?

Digging through the old proxies reveals a remarkable tale.

Jobs held 15 million options at an exercise price of $9.15, which meant they started to gain value only if Apple stock exceeded that price, and 40 million options at an exercise price of $21.80. Apple at the time was little more than $7 a share. (These prices have been adjusted to reflect the subsequent stock split.)

Total value: $12.8 billion.

In other words, Steve Jobs missed out on $10.3 billion in extra profits.
Those are big numbers of course, and although I don’t like to discuss specifics, I will admit that my net worth is less than that of Steve Jobs. Really, it is. I could provide screenshots, but there will always be those who say I am faking them and pleading poverty...

But seriously, whatever one’s net worth, it has to be extremely painful to look at your net worth and think that you could have been worth some four times that.

No comments: