In the mean time I want to clarify some of these options and their targets and how/when they can be exercised. Hopefully what I write is correct, if not please let me know. For this example I will be looking at LOV (Lovisa Holdings). I have BOLDED MY QUESTIONS and just wrote my normal step by step of how to investigate in normal.
On the 11/3/20 they listed their 2A which showed the unlisted securities as below. I as an investor can research into each of these and see what their requirements are and price to exercise going back through AGM notes and annual reports. For this one I have looked into the 2019 annual report. (Is there any other way to look into it or are these two documents good enough?)
So I decide to look at the 2019 options. In the 2019 annual report pg 25/26 I see the following exert. (Italics original document, bold is questions of mine to confirm)
FY2019 LTI - Performance Options In October 2018 a grant of Performance Options was made to the Managing Director, Executives and Management as part of the FY2019 LTI. The key terms associated with the 2019 Grant are:
The performance period commences 2 July 2018 and ends 27 June 2021
The exercise price of the Performance Options is $10.95, which represents the 30 day VWAP to the date of grant.
(Therefore when the time comes at the end of the period and he hits his targets for whatever % exercisable then he no matter the price of the period whether $5 or $15 he can buy X amount of shares at that $10.95 price?)
(When they do exercise it, they buy those options which become shares, and that money just goes into the "financing activities" section of the balance sheet?
A total of 2,758,608 Performance Options were granted, with 2,564,103 of these options subject to shareholder approval.
(Therefore 2,758,608-2,564,103 = 194,505 options were granted immediately?)
The grant of performance options are subject to performance conditions based on delivering the Company's EBIT target over the performance period, as set out below.
For Performance Options granted to the Managing Director, the performance options will be tested at the end of the performance period, and if they are determined to have vested they will then be subject to a further 2 year holding restriction period ending 2 July 2023, after which time they may be exercised up to their expiry date being 12 months following the end of the restriction period.
(Therefore if he does get to exercise, he will have to wait another 2 years before he can exercise them? This means that they make them focus and stay with the company and want them to do well?)
For executives other than the Managing Director, the expiry of the performance options is 12 months following the end of the performance period
The performance options granted to the managing director were approved at the 2018 AGM.
No Options were forfeited during the year.
The board has determined the EBIT Target growth hurdles applicable to both the FY2018 and FY2019 grants are as follows:
Therefore EBIT was $51.1m in 2018 I have then applied the above % to this starting mark and what the amount of shares to be allocated if correct. I checked the 2018 AGM notice notes and see that all the share options are for the MD Mr Fallscheer
(Have I compounded this correctly?) (Is the % share options allocated awarded correct as well or is there something I need to include or know?) (And following a previous question does exercisable mean that they have to pay?)
In the 2019 Annual report the EBIT was $52.5m, therefore this makes me question my compound growth amounts.
(Lastly what is the best way to link EBIT to SP and can you do a correlation like % increase in EBIT is expected to increase SP by X amount?)
Thanks for reading and appreciate any help Daz
LOV Price at posting:
$3.55 Sentiment: None Disclosure: Not Held
(20min delay)