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EXTR accelerated option vesting for some 4.5M shares, which is 21% of outstanding options, writes "Slash", a professional investor with experience on both the buy-side and sell-side. What is amazing is that this accelerated dilution is to avoid "expense in fiscal years 2006, 2007 and 2008." This amounts to about $11.43M of "free money" paid-for by all of the current shareholders. And get this:

the Compensation Committee believes that this action is in the best interests of Extreme Networks' stockholders

I do not how that creates any thing for current shareholders. If you bought the stock at anything above $7 (that's the price of options that are being accelerated vesting) then you are down 40% and these employees/management gets to erase that lose. Maybe I am naive but seems like its more about employee-interest than shareholder interest. Its not like these employees are new, these folks have been there years and the stock price reflects their efforts (sorry to sound so blunt).

This might be a way to raise employee morale, and yes a lot of other companies have done this in the past but it is still dilutive for current shareholders, and if I was one of them I would be furious after this. The only positive I see from this is that it might indicate that management believes stock will move up from here to get these options in the money. But you never know, they might get bought out.

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Source: Extreme Compensation Scheme (EXTR)