Goldman Execs to Win on Financial Crisis Options
In an effort to retain key executives and board members during the financial crisis of 2008 and 2009, Goldman Sachs Group Inc. (GS) issued stock options to 350 executives and board members.
With the options set to expire later in 2018, the options’ holders, many of whom are no longer with Goldman Sachs, are set to collectively rake in $3 billion or more, underscoring the meteoric rise in financial companies’ stock since the Great Recession.
According to a report in the Wall Street Journal, citing regulatory filings, among the executives who will be able to cash out is David Solomon, the incoming chief executive of the storied Wall Street bank who was awarded 27,000 options during the financial crisis. (See more: Goldman Sachs to Name Solomon as New CEO This Week: Report.) With banks short on cash during that period, they turned to options that would pay out in the future to keep key management.
Goldman Sachs Options Ahead Of Other Banks
The Wall Street Journal noted that James Dimon, the chief executive of JPMorgan Chase & Co. (JPM) was awarded two million options in January of 2008 at a strike price of $39.83. On paper he has a gain of around $40 million, as JPMorgan’s stock is trading around $238.95. About 90% of Bank of America Corp. (BAC) options granted during the time frame were worthless when they expired, noted the report. Of all the Wall Street banks Goldman Sachs options have had the best run. All of the options the bank granted since 2003 have expired with shares trading above the exercise price known as “in the money.” The last series is that of the 2008 options which expire later in 2018. In Dec. of 2008, it issued 36 million options with an exercise price of $78.78. Shares of Goldman Sachs have been trading over $230 recently. (See more: Goldman Stock Seen Rising 15% on Raised Estimates.)
Since 2014, executives have sold options to the tune of $506 million, according to the paper, while other Securities and Exchange Commission filings show more than 31 million of the 2008 options have been exercised, largely in 2014 and 2015 when the stock was trading from $170 to $200. That would result in the pretax profits of around $3 billion, noted the Wall Street Journal.
Goldman Sachs Isn’t As Profitable But Stock Is Up
The windfall comes at a time when Goldman Sach is less profitable than it was previously but has still seen its stock surge. One Goldman Sachs executive who won’t benefit from 2008 stock options: Chief Executive Officer Lloyd Blankfein. He wasn’t awarded any as part of his move to give up his bonus that year, noted the report.
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