But a restricted-stock exchange usually causes less dilution than an extra option grant without cancellation. One of his clients, a midsize public retailer, canceled employees' underwater options and then paid them a nominal value per option as a retention payment last year. Co-founders Brian and David Crosby figure that the options they acquire will recover value during their remaining life, typically seven years. Even with these alternatives, some corporations continue to reprice options. When Amazon's share price continued to drop earlier this year, it decided to submit a tender offer to issue new options.
Workers can trade in existing options for new ones with an even lower strike price.
Ms. Silverman is a staff reporter in The Wall Street Journal's New York bureau. Inc. All Rights Reserved.