Hey Dash, Thanks for the great article and insight. Regarding the modification of ISO to NSO, do you know if that triggered any adjustment to the exercise price of the employee options? Or is it merely an adjustment to FMV for accounting revaluation purposes?
According to Section 424(h)(2) of the code,
2)Special rule for section 423 options In the case of the transfer of stock pursuant to the exercise of an option to which section 423 applies and which has been so modified, extended, or renewed, the fair market value of such stock at the time of the granting of the option shall be considered as whichever of the following is the highest —
(A) the fair market value of such stock on the date of the original granting of the option,
(B) the fair market value of such stock on the date of the making of such modification, extension, or renewal, or
C) the fair market value of such stock at the time of the making of any intervening modification, extension, or renewal.
The concern here is that the modification would have an adverse impact on the employees exercise price if there were a material change in FMV between the time of original grant and modification.