Cray uses strong balance sheet buy back drowning options

Print Friendly, PDF & Email

Now, this is the kind of news that you only get from insideHPC. I was trolling the SEC filings for our HPC companies, as I am wont to do, when I came upon Cray’s most recent filing, form SC TO-I. Ah, good old SC TO-I.

So what is it? In this filing Cray is outlining its plans to by back options issued to employees in better times; options that are now (practically) worthless. Here is the meat (page 11 if you want to look it up yourself)

Cray logoCray Inc. (“Cray,” the “Company,” “we” or “us”) is offering to purchase for cash certain Eligible Options (as defined below) from our Eligible Holders (as defined below). The stock options (the “Eligible Options”) that are subject to this Offer are those stock options to purchase Cray common stock that:
•         were granted on or after January 1, 2000 and on or before April 30, 2007,
•         have a current per share exercise price of $8.00 or higher, and
•         were outstanding (that is, were not previously exercised, expired, terminated or forfeited)

on February 20, 2009, and remain outstanding on the Expiration Time.

…The cash amount that we are offering to pay for each Eligible Option that is tendered to us under this Offer ranges from $0.10 to $0.801, and is specifically set forth on Schedule A attached to this Offer (such payment shall be referred as the “Cash Payment”).

In the filing Cray is required to value the transaction (see the first page), which they nominally assign as follows

Calculated solely for purposes of determining the filing fee. This amount assumes that options to purchase 2,137,485 shares of Common Stock, $0.01 par value, of Cray Inc. will be purchased pursuant to this offer for an aggregate of $764,824 in cash. The actual transaction value will be based on the number of options tendered, if any, which may result in a lesser aggregate amount.

But, as they point out, the real cost to them will likely be less as some employees will hold on to their options, either through inaction or in the belief (hope?) that the price will one day rise above 8. shows the 1 year consensus estimate at $5.75, so this isn’t completely outside the realm of possibility.

But why, you may well ask, is Cray doing this? Is there a business purpose (the elimination of the future liability the company has to carry on the balance sheet for outstanding options), or is this really just about employee morale. I asked CEO Pete Ungaro in an email

The main focus here is employee morale and to give them a chance to get something for all of their hard work and dedication. At Cray, we succeed or fail based on the efforts and expertise of our employees so anytime we can help them in some way, that is also good for our shareholders, we try and do that. From a business angle, it is good to get rid of what is known as “overhang”, which is stock outstanding which is worthless (or somewhere approaching that), and options that are well out of the money are a good example of such. But it isn’t much of a financial win, it is more about giving our employees reward for their efforts, which I think will pay off for our shareholders in the long-term.

Holy crap. A company that actually acts like its employees are important instead of just printing it in their mission statement.


  1. […] drowning options from employees as a gesture of goodwill? I thought you wouldn’t…so here is the link. Basically the company offered to buy back employee options for prices ranging from $0.10 to $0.801 […]


  1. Bravo for Cray!

  2. is there a way to become a content writer for the site?

  3. Well done Cray. It’s good to see a company that cares about their employees. Too many large companies don’t give a shit.

  4. A huge well done Cray – always a good time to ‘buy back’.

  5. Great information, I will be linking back to you and going to look around at your other posts.