The relationship between stock option back-dating, Nasdaq de-listing, shareholder law-suits and CEO resignations is still reverberating around Silicon Valley.
Last week, Vitesse CEO Chris Gardner gave a graphic description of the hassle which hits when you encounter what he called “a stock option back-dating challenge”.
“We had identified options granted with inappropriate dates," said Gardner, “that caused us to state that our financials could not be relied on. That led to us being in technical default with several credit funds. The bond holders threatened to call in that debt. So we had liquidity challenges.”
Then, adding to his woes, the shareholders sued for compensation for the drop in the share price relating to the extra money paid on the stock options attributable to the back-dating.
“We settled the shareholder litigation over the stock options question," said Gardner. Vitesse has said the back-dating practice could cost the company some $120m. It is to re-state its profits in Q1 2008.
Others involved in the ‘challenge’ have been: Broadcom, Analog Devices, Cirrus Logic, Apple, Microtune, MIPS, KLA-Tencor, Xilinx, Altera, Sanmina-SCI, Nvidia, AMCC, Marvell, Rambus, PMC-Sierra, Asyst and Semtech.
In cases where the re-statement of financials takes too long, the Nasdaq has de-listed the company. Maxim has been de-listed from the Nasdaq, won’t file new financials until Q1 2008, about a year and a half since the last filing, and is being sued by its shareholders. Founding CEO Jack Gifford has resigned.
Atmel is bracing itself for an estimated $125m hit when it restates profits in 2008
So far, only one CEO, the CEO of Brocade, has been convicted.