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Hi,
“At the end of year the entity reprices it’s share options because the share price has fallen.The other vesting conditions remain unchanged. At the date of repricing,the fair value of each of the original share options granted (before taking the repricing into account) was $10.The fair value of each repriced share option is $15.”
Does repricing i this context refer to reducing the share price? How would the fair value increase as a result?
How do we find intrinsic value?
Thank u so much
Hi,
A repricing is effectively a modification, and arises because the fall in share price might make the exercise price unattractive to investors. To make the option attractive again the exercise price is reduced further, and reduced to such an amount that the intrinsic value will increase due to the larger difference between the share price and option price.
I’d not get too concerned with intrinsic values as that is more of a P4 issue.
Thanks
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