Nabors and HCC Insurance Holdings Grapple with Options Reviews

Nabors Industries is reinvestigating its option-granting after a Wall Street Journal article questioned the company's practices. Although an internal review revealed nothing questionable, the article mentioned that CEO Eugene Isenberg received $450 million over the last 19 years through stock-option grants whose value was increased by "controversial moves." Nabors allowed Isenberg to trade worthless options for those with lower exercise prices and "reloaded" him with new options once he cashed in others, according to the article. On Wednesday, Nabors's shares rose 30 cents to $30.53. In other corporate options news HCC Insurance Holdings reported a gross, noncash compensation expense of $26.6 million following an independent review of options-granting errors between 1997 and 2005. Although the expense has no effect on the company's revenue, cash or cash flow for the time period, it does mean a net after-tax decrease in shareholders' equity of $3.3 million. HCC's shares rose 38 cents to $32.04.

• Sources: Wall Street Journal, Businessweek
• Related commentary: Nabors Should Capitalize on Strong Natural Gas Demand, The Long Case for HCC Insurance Holdings
• Potentially impacted stocks and ETFs: Nabors (NBR), HCC Insurance Holdings (HCC)

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Comments

[CrossProfit:]

With regard to HCC, why would anyone think that a newfound EXPENSE would alter revenues? EXPENSES reduce profits or EPS not revenue. Sales increases and decreases affect revenue. Has the WSJ gone into double-talk mode?

A bit early to be under-writing (reverse) the bottle – don’t ya think?!

2006 Dec 28 09:30 AM