April 20, 2020


The Impact of COVID-19 on Stock Options: Whether to Reprice or Not

Stock options are a common form of long-term incentive compensation, among public and private companies, that aligns the interests of employees and executives with those of shareholders. Due to the current downturn in global market conditions caused by COVID-19, many companies are now facing a situation where outstanding employee stock options are significantly underwater (i.e., stock options have an exercise price greater than the current market price). As a result, it’s expected that stock option repricing will reemerge as a “hot topic” of discussion.

This paper summarizes key strategic, talent, and technical considerations for boards and crossfunctional management teams as they evaluate strategies related to stock option repricing. It reflects a collaborative effort of subject-matter experts from Houlihan Lokey and Compensation Advisory Partners (CAP), a leading independent consulting firm specializing in executive and director compensation and related corporate governance matters.