When a company is taken over, the fate of stock options depends on various factors. Let’s break it down:
Call Options:
- A call option grants the holder the right to purchase shares of stock at a pre-determined price before it expires.
- If the acquiring company offers a higher price than the call option’s strike price, the holder can profit from the difference between the strike and takeover price.
- If the strike price of the call option is higher than the market or takeover price, the option will expire worthless.
- Employees with vested stock options of the target company are typically compensated by the acquirer1.
Unvested Options:
- Unvested options may have their vesting accelerated, allowing option holders to participate in the sale.
- Alternatively, the acquiring company’s board may decide to buy back or cancel unvested options at their fair market value2.
Vested Options:
- The acquiring company could assume your vested stock options or substitute them.
- You might still need to wait to buy shares or receive cash, but you can retain your vested shares3.
Remember that specific details can vary based on the terms of the acquisition and the company’s policies. Always consult official documentation or seek professional advice for accurate information.
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