Exercise of Insider Stock Options
I haven't posted to the community website before, but I have been following EAG for some time and have concerns with the number of options recently exercised by EAG Insiders and would like to get the input of the community before taking additional steps (I may be missing something)
Here is my line of reasoning:
1. According to EAG's May 5 press release the Company issued 2,283,500 stock options. 2,168,000 of these stock options were issued to Insiders (as reported in SEDI)
2. Of the 2,168,000 stock options were issued to insiders, 1,011,750 of the stock options are considered to have been repriced or amended and consequently "are subject to disinterested shareholder approval and may not be exercised until such approval has been obtained" (as quoted in the Company's press release). Using simple arithmetic that means that 1,156,250 of the stock options granted to insiders on May 5 are new stock options.
3. I understand that EAG uses a TSX-V 10% Rolling Stock Option Plan that allows no more than 25% of any stock option grant to vest in any 3 month period (this also stated in EAG most recent Management Information circular on page 6). Accordingly, 289,063 stock options were available for exercise by insiders on June 7 and 8, 2015; the dates that insiders exercised their Stock Options
4. SEDI however reports that insiders exercised a total of 1,310,000 Stock Options were exercised by Insiders on June 7 and 8; a difference of 1,020,938 Stock Options.
5. It is possible that the insider Options are subject to accelerated vesting as a result of proposed Oban transaction, but such accelerated vesting would normally be accompanied by a press release to this effect and would only typically occur contemporaneously with the closing of the transaction. Neither of these have occurred
6. Even if accelerated vesting is assumed to have occured, a total of 196,750 stock options were still exercised even though they were "subject to disinterested shareholder approval and may not be exercised until such approval has been obtained."
I also have an issue with exercise date of the Stock Options. The Press Release announcing the Oban transaction was issued by EAG on June 9, 2015, but as previously mentioned all of the Stock Options exercised by Insiders were exercised on June 7 and June 8. I don't think it is unreasonable to assume that the Insiders would have been subject to a Blackout and consequently would have been prevented from exercising their options.
The only reason that I can think of doing this would have been to avoid income tax withholdings on the share exercise. EAG was trading around $0.34 on June 7 and 8 and consequently the insiders would have only have to remit withholdings on the $0.03 difference between the trading price and the exercise price as opposed to the $0.48 differtence that would have resulted had they exercised their options after the June 9 press release. This seems to me like a really base reason for trading in a Blackout, but stranger things have beendone.
Anyways, I love to hear people's thoughts on the matter.