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But ultimately, it can prove to be quite costly to shareholders.
(To learn more, see .) Cost to Shareholders The biggest problem for most public companies will be the bad press they receive after an accusation (of backdating) is levied, and the resulting drop in investor confidence.
An option's strike price is usually chosen by taking the stock's closing price on the day that the option was granted, calculating an average of the day's high and low prices or by taking the closing price from the previous day's trading.
For example, suppose that it is August 16, 2006, and the closing share price of XYZ Corp. On June 1, 2006, XYZ Corp.'s stock price was at a six-month low of $25.
The well-known data storage company allegedly manipulated its stock options grants to ensure profits for its senior executives and then failed to inform investors, or to account for the options expense(s) properly.