When an employee – Dr Abeyratne in this case – exercises their options they incur debts:
- The exercise price has to be paid: $150,000
- The difference between the strike price and the current share price is classed as salary income and income tax is payable within 28 days: roughly 42% x $165,000 = $69,300
Presuming that Dr Abeyratne doesn't have $219,300 sitting in a bank account he will have to sell enough of the new shares to cover the debts.
At the current price of 10.5c that means he will have to sell 2,088,571 shares, or roughly 300,000 shares per day for the next seven trading days.
If you look at the trade history, even spread out over a week and a half this is a pretty large volume to try and sell on the market. It will be almost impossible to drop this many shares on the market within the time frame available without exerting downward pressure. The alternative is to place them privately so they don't crush the market. But that generally requires a discount to attract a buyer, and that will signal a lower price to the market.
And all the while we will have to tolerate all the envious baby-whining here on Hotcopper!
