[Dubow & Co.'s once-worthless options]
At the end of February, the board of directors gave CEO Craig Dubow options to buy 500,000 shares of Gannett stock over four years starting in February 2010. The shares were among 1.14 million given to 11 of the company's top officers as part of their 2008 annual pay.
But those options were worthless almost immediately because the strike price -- $3.75 a share -- was already too high to make exercising the options worthwhile. No more. GCI's stock soared 39% yesterday, closing at exactly $3.75 a share. Investors rallied around news that Ariel Capital Management has more than doubled its stake in Gannett.Here's what yesterday's price run-up means for Dubow: For every penny the stock advances, his 500,000 in options increase $5,000 in value on paper. Put another way, if Gannett shares soared another $1.06 a share on Monday, as they did yesterday, Dubow would make a cool $530,000 in paper profit.
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Sorry if I sound foolish, but the reality is that I don't understand options. If the strike price is $3.75 and the stock closed at $3.75, aren't the options still worthless?
ReplyDeleteThe headline once again is a good indication of why Jim was a pretty weak business writer. "His 500K stock options aren't worthless anymore." Really? Strike price for the options is $3.75. Stock closed yesterday at $3.75. Meaning if Dubow could sell them at that price, he would yield a total of $0. What's another word for options that yield nothing? Let me see, I've got it hear somewhere. Oh yeah, worthless. You can see why USAT didn't mourn when Jim took the buyout.
ReplyDeleteJim, I forget. Are we supposed to be wanting the company to succeed or fail?
ReplyDeleteIt's perfectly reasonable to want to the company to succeed but it's absolutely ludicrous to think the CEO could sit back and earn a cool half-mil (on paper or otherwise) while so many journalists have been fired or furloughed in the recent months. It just goes to show that the corporate execs are willing (and expect) to profit at the expense of our friends and their communities.
ReplyDeleteNo doubt there is significant reorganization going on within Gannett & every other newspaper-based company; and that industry-wide reduction include a reduction of staff & facilities and a reorientation of business methods. Some get hurt in the process. To some potentially great degree, that hurt has been recently minimized by relying more heavily on unpaid furloughs rather than layoffs. Those remaining will benefit if the changes lead to a stable future. Dubow will benefit most as he's at the top of the pyramid but everyone else will as well. We can focus on those gone or the large mass of employees remaining - I choose the latter.
ReplyDeleteAnd yet Jim will sit with his thumb up his ass at the next meeting.
ReplyDeleteJim, I don't begrudge Gannett's leaders a dime of them money they earn. I will never earn the kind of money the highest echelon of corporate America receives. But I will never waste a moment being jealous of what someone else is paid.
ReplyDeleteThe fact is the stock price soared on Thursday and a spokesman for the company buying a bunch of Gannett stock seemed pleased with the company's direction, despite your blog, Jim.
The following is lifted directly from a wire story today about the stock purchase by Ariel.
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"There's been just so much negative sentiment across the media sector," Ariel portfolio manager John Miller told The Associated Press. "What can't be ignored are the cyclical issues. We believe advertisers will return when the economy strengthens."
Miller also approves of Gannett's leadership under Chief Executive Craig Dubow, and says the company has control of its debt, which totaled $3.8 billion at the end of 2008.
"They've typically been very astute in terms of their capital," Miller said. "They do have debt on the balance sheet, but we think it's manageable."
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I don't know what this Miller guy is thinking. Hasn't he read Jim's blog -- filled by negative comments by those who delight in Gannnett's struggles? Doesn't he see the same things Jim does? Did he consult with Jim before making the purchase?
No matter what Gannett does, Jim and his band of less-than-merry men will find a way to complain or whine.
11:59 am you couldnt have said that better!!! People here need to support Gannett.. Bashing does no good for anyone
ReplyDeleteWe all want the newspapers to succeed but abusive, corporate-driven management tactics need to cease.
ReplyDeletePersonally, I'm fine with Dubow getting stock options and making money that way. At least he is then being rewarded for success.
ReplyDeleteIt's the $875,000 cash bonus that was ludicrous.
Stock options give him the motivation to make the whole company succeed. Cash bonuses for laying people off are ridiculous.
But he hasn't made money on the stock yet. So this isn't much of an issue. Any one of us have the option to buy GCI stock at $3.75. And many of us just have with our 401k plans. Heck, we had the option to buy it cheaper.
I still don't think it's a bargain, though. When you look at how the company is managed, it's clearly poised for long-term failure. Let's not get too excited about this. Ariel also bought a whole bunch of McClatchy stock at a high price. And we all know how that's panned out.
2:22 p.m. -- You said:
ReplyDelete"I still don't think it's a bargain, though. When you look at how the company is managed, it's clearly poised for long-term failure."
Please return to this blog post and offer your reasoning and your business management credentials for offering this comment.
There are apparently some folks in the money management world who disagree with you -- witness the big stock purchase this week.
"No matter what Gannett does, Jim and his band of less-than-merry men will find a way to complain or whine."
ReplyDeleteJim prefers the term "gay men" or "less-than-gay men."
craig wont' make a nickel today, Jim...the market is closed
ReplyDelete"We can focus on those gone or the large mass of employees remaining - I choose the latter."
ReplyDeleteGood for you, Anonymous 10:27. Glad to see you have no fear for your own job and thus, can't see what the rest of us do.
"People here need to support Gannett.. Bashing does no good for anyone" Anonymous 12:46
Gannett needs to stop bashing its employees, and start supporting them. Gannett needs to start listening to the people who actually do the work, and stop being greedy.
People will support Gannett when Gannett starts doing the right thing by them. And when was the last time that happened?
well, well. well - now we whine when top management does well on something that benefits everyone. How trite.
ReplyDeleteAs far as I'm concerned, the shy's the limit for the benefits CD garners from an increase in the GIC share price. That means we can all be winner.
To everyone on this thread that had positive comments - you are being a realist. The better Gannett does as a company the better we do as individuals. I have no problem with that. It seems institutional investors think we're now headed on the right path as well.
Jim, you need a differ/ent company to goafter now
Since they can't sell for anything, they are worthless. Plus, if they are the same as when I got them in the 1990s, you have to wait a year or two before you can even exercise them. So they can't evey do that for a long time.
ReplyDeleteThese are great, they were good to me before I left (the options, that is), but let's be careful about calling them worth something when they are not.