Not being able to exercise stock options because of restatement or earnings by compan

[Michael.Gioan]

CALIFORNIA

I own 800 options in the Quest Software stock QSFT. These options were awarded to me when I was hired in Sept 2005.
I left the company on 2/15/08 and I have until March 16th to sell my options.

Issue is as follows:
After an options probe, Quest had to restate its results going back to 1999 ion Jul 6 2006. Restatement was completed beginning of January 2008. During re-statement, employees were barred from exercising their optiosn. After re-statement, stock fell from $18 to $14 a share. In my case, this constitutes a $3,200 loss since I was not allowed to sell my options at the high mark. My options grant contract stated the value of the options based on the day I was hired. This was obviously before the re-statement was required by the SEC.
I believe that :
1. The start price as quoted in my options contract should be adjusted down to reflect the consequences of the earning restatement. Essentially, I was deceived on the real value of the options I was granted.
2. I should be allowed to sell my stock at the average value between high and low for the period when I was not allowed to sell my options.

Needless to say, all employees with options that have left Quest between 7/06 and 02/08 are similarly affected.

Please help.
Best regards,
Michael M. Gioan, MS, MA

 

[tranquility]

As to #2, forget it. I know of no remedy or theory which would allow for that. I'm not sure of their reasoning for why you "were not allowed to sell your options", but am assuming it is valid for some reason. More would need to come to determine if the restriction was a breach in any way. Damages would be very difficult to calculate, but it would not be your method.

As to #1, you have an issue. Let's face it, you reasonably believed the option would allow for a certain profit if the company did better in the stock market over time. With the restatement, you lost the opportunity to make such a profit. Yet the company had to restate. You don't have a contractual remedy as you cannot get expectation damages. I find it unlikely you will get intentional misrepresentation as a tort. You might be able to prove up a negligent misrepresentation or, perhaps, some sort of securities violation (If the options are considered a "security".) but those kind of suits ain't easy.

There is nothing easy here. There will not be a lawyer letter magic wand which will make things go away. The only chance is to sue and, even then, you may be trying out novel theories. Novel theories are expensive. If you could get a class together you might find someone to take the case. I don't think you'll find someone to help you individually because of the difficulties involved. Sorry, I hear where you are coming from it seems like you got hammered unfairly.

 

[xylene]

CALIFORNIA
I believe that :
1. The start price as quoted in my options contract should be adjusted down to reflect the consequences of the earning restatement. Essentially, I was deceived on the real value of the options I was granted.

Just think how everyone who purchased the stock feels.

2. I should be allowed to sell my stock at the average value between high and low for the period when I was not allowed to sell my options.

Well, the SEC is not going to grant you your time machine.

Also, your terminology is confusing. Did you have stock, or options?

Needless to say, all employees with options that have left Quest between 7/06 and 02/08 are similarly affected.

Too bad you didn't have union backing you up.

 

[Michael.Gioan]

Dear xylene...

Your comment on #1:
I know, but at least they could sell their stock. Quest employees were PREVENTED to exercise their options until the re-statement was effective and accepted by the SEC... So I got to watch the stock hit 150% value and not being able to exercise my vested options.

Your comment on #2:
Options. If I had been a stock-holder, this thread would not even exist.