Stock options in divorce

[MrZebra]

What is the name of your state? AZ

After my first divorce 10 years ago, my company allowed disposition of my stock options to former spouse via QDRO, however they changed that policy 3 years ago. I am now going through another divorce, and my company says they no longer administer QDRO's or allow transfer of stock options to ex-spouses. So my question then becomes, how in the world do I value a stock option? 85% of my stock options are underwater today, so do I look at some sort of average value for them, or is there a guideline I can try to use when compensating her with equivalent assets?
Thx!

[LdiJ]

Originally Posted by MrZebra

What is the name of your state? AZ

After my first divorce 10 years ago, my company allowed disposition of my stock options to former spouse via QDRO, however they changed that policy 3 years ago. I am now going through another divorce, and my company says they no longer administer QDRO's or allow transfer of stock options to ex-spouses. So my question then becomes, how in the world do I value a stock option? 85% of my stock options are underwater today, so do I look at some sort of average value for them, or is there a guideline I can try to use when compensating her with equivalent assets?
Thx!

Are you saying that if you exercised the options now you would have a loss rather than a profit?

In that case, I would certainly argue against any division of the stock options at all.

[MrZebra]

Yes, most of my options have no value today because they are underwater. I have no problem splitting the 'vested' stock options that do have value today with the ex-spouse. However, for those options which are not yet vested (don't vest for another 4-7 years), how do I assign a value to those, since I can't excercise them until they're vested years down the road, and at that point they may have value or may be worthless?

Is there a formula the courts may use for assigning unvested stock options with some sort of value?

[chitown]

Unvested options are valued using the Black-Scholes formula. The formula requires several assumptions that can be manipulated to achieve a more desired value. Volatility, interest rate and dividend yield are three out of the five(?) required assumptions. Run a google search with Black-Scholes and you can find a few sights that let you utilize the valuation formula. Documenting the rationale for your assumptions is the key to the Court/SEC accepting your valuation.

Doesnt matter if they are currently UW. Depending on the assumptions utilized, the size of Co. you work for, and length of time before vesting and expiration can cause higher than expected values

Good luck