FAQs: Stock Appreciation Right
1. My company does not provide a value estimate for my stock appreciation right. How do I value it?
For purposes of financial disclosure, you may value a stock appreciation right based on the difference between the current market value and the grant price. This formula is: (current market value – grant price) x number of shares = value.
2. What does it mean to say a stock appreciation right is “underwater”? And how do I value a stock appreciation right that is underwater?
The stock appreciation right is said to be “underwater” if the value is zero or a negative number. This situation occurs when the current market value of a share is less than the grant price. In other words, the stock decreased in value after the employer granted the stock appreciation right, and the employee would not benefit from exercising the right. However, stock appreciation rights that are underwater are reportable because they have value. Stated differently, there is a value to holding a stock appreciation right, even if the right is currently underwater.
If you have no reasonable means for valuing an underwater stock appreciation right, you may employ an alternate form of reporting. The alternate form of reporting is intended to provide sufficient details for a reader to assess the value. Accordingly, in that case, provide the following information in the “Description” field: (1) grant price; (2) number of shares; (3) expiration date; and (4) for an unvested stock appreciation right, the vesting date.