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In “bullet-dodging,” a company temporarily depresses its stock price by releasing negative information before the option-grant date.
In “spring-loading,” a firm holds back on positive information until after the option date.
That’s above and beyond their salaries and the official value of their options.
In the 90 days before the option grant, the average stock generated what analysts call an “abnormal negative return” of 1.9% — that’s a return 1.9% below those on shares of comparable companies during that same period.
At companies that issued lots of stock options, the disclosures before an option grant were more likely than not to drive shares down and those that came after an option date were more likely to send prices up.
The same pattern showed up with company-issued “guidance” about upcoming earnings and with accounting decisions that effectively shift profits from one quarter to the next.
It’s been a decade since scores of corporations became embroiled in the “dating game” scandals over backdated CEO stock options, and most people thought that reforms in the aftermath ended the problem years ago. Daines of Stanford University, has unearthed a new and potentially more sinister version of the scheme — call it Dating Game 2.0 — that replaced the original.
Daines is the Pritzker Professor of Law and Business at Stanford Law School and a senior faculty member at the Arthur and Toni Rembe Rock Center on Corporate Governance, which is a joint initiative of the law school and Stanford Graduate School of Business.
It was especially deep, however, at companies that were also hard to value and where company announcements and “guidance” could have a big impact on investor expectations.
Think here of a fast-growing technology company, where it’s difficult to predict the exact pace of future growth and where the statements of top management can significantly influence investor expectations.
Sometimes, of course, a company can do both things in the same cycle.Tags: Adult Dating, affair dating, sex dating