Semel’s Compensation: Addendum

I got this email below from Outcast PR in response to the piece I wrote yesterday. Looks like Yahoo’s PR agency has been chartered to find all the articles on Semel’s pay, and “address” them.

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Hi Sramana,

I was hoping you could make a correction to your piece in Seeking Alpha on Terry Semel’s compensation. You wrote that Terry will receive a $25.7 million bonus, but this is inaccurate.
Terry Semel received an option to purchase 800,000 shares of Yahoo! stock at a strike price of $US 32.12 a share. The value of the stock is probably best determined using Black-Scholes valuation, which is the industry standard way to measure option values, not by multiplying the strike price by the total number of shares which you have done.

While the shares are fully vested and he can choose to exercise them at his discretion, if he
were to exercise them today, when the stock is below the $32.12 strike price, his shares would
be valueless. The shares have value if Yahoo!’s share price exceeds the $32.12 option price.

Given all of this, I hope it’s clear that he was not given a $25.7 million bonus. Rather, he was
given an option to purchase 800,000 Yahoo! shares at $32.12 each.

Would it be possible to issue a correction as the Wall Street Journal, Reuters and others have done that clarify that Terry’s stock value is not $25.7 million, rather he was given an option to
purchase 800,000 Yahoo! shares? Please let me know if this doesn’t make sense.

Jessie

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It actually does, Jessie! Thanks for the clarification.