Google to let employees capitalize on option 'forwarddating'

That's not exactly what's going on, but Google is working with Morgan Stanley to create a market where financial institutions can buy vested options directly from employees via a web-based auction system. The benefit for employees is that they can get more money than they would from exercising the stock on the market as prices will factor in potential growth in the future. Why would banks pay for a premium instead of just buying the stock on the open market?

For one thing, instead of paying say $500 for each share, a bank could just pay $25 on the hopes that in a year, the price will exceed $525. By investing in the options instead of the stock, you increase the potential return because you can buy many more $25 options than $500 stocks. Google explains the bigger picture better in their page "The Market for TSOs" and talks about letting employees capitalize on the time value of their options. Hence, forwarddating as opposed to backdating : ).

The other interesting thing readers of this blog may appreciate is that while Goldman did Google's [last] stock offerings (and I speculated that they handled the YouTube aquisition), Morgan Stanley was picked to handle a technical solution for both their innovative online dutch auction IPO as well as this TSO auction system. [Incidentally, I missed the news that Morgan and CSFB underwrote Google's first secondary offering of (Pi-3)E8 shares.]

SOURCE: Official Google Blog

UPDATED: 12/14/2006 8:06pm EST