Stock option-incentivised EMC staff could brain drain out of the company as the Dell acquisition will cash-out their stock options, de-incentivising them.
We're told by an EMC insider that: "All EMC golden handcuffs disappear at the Dell acquisition. That is, immediately prior to the acquisition, all EMC restricted stock units (the primary mechanism EMC uses to incentivise high-performing individuals) vest and will cash out upon the acquisition. This is going to lead to a mass exodus of EMC employees resulting in a massive brain-drain – both ICs and managers ... I have coworkers counting down the days.”
ICs are individual contributors.
An EMC merger agreement SEC filing mentions EMC equity awards, and states:
The merger agreement provides that each currently outstanding EMC stock option will vest and become fully exercisable prior to the effective time of the merger. As of the effective time of the merger, each outstanding EMC stock option will be canceled and converted into the right to receive the merger consideration with respect to the number of shares of EMC common stock issuable upon the exercise of such stock options on a net exercise basis, such that shares of EMC common stock with a value equal to the aggregate exercise price and applicable tax withholding reduce the number of shares of EMC common stock otherwise issuable.
The merger agreement also provides that as of the effective time of the merger each currently outstanding EMC restricted stock unit and share of EMC restricted stock will fully vest (with performance vesting units vesting at the target level of performance) and the holder will become entitled to receive the merger consideration with respect to the shares of EMC common stock subject to the award (which shall be calculated net of the number of shares withheld in respect of taxes upon the vesting of the award). The merger agreement provides that Denali may agree with individual award recipients to different equity treatment. No such agreements were in effect as of the date of this proxy statement/prospectus.
We understand that, that when Dell went private, outstanding unvested stock grants were converted into equivalent cash incentives with similar payout schedules to the vesting schedules they replaced. An Ars Technica article covered this.
An EMC spokesperson asked about this said: "The combined company will have competitive compensation and benefits programs to attract and retain the best talent in the industry.” ®