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(Revised from original 2002 version)
Akamai's Underwater Options (A)
Akamai's stock price declines dramatically with the NASDAQ in 2000, causing virtually all employee options to go underwater. Ownership and retention incentives are largely destroyed, and employee morale falls sharply. Management weighs the pros and cons of various alternative "solutions" to this problem (including repricing, issuing a new supplemental grant, canceling the underwater options and issuing a delayed regrant, and making a tender offer to exchange underwater options for fewer shares of restricted stock).
Hall, Brian J., Houston Lane, and Jonathan Lim. "Akamai's Underwater Options (A)." Harvard Business School Case 902-069, October 2002. (Revised from original March 2002 version.)