Senior ARM managers lose Sh7bn stocks cash
2 months ago, 10 Oct 07:28
Senior ARM Cement #ticker:ARM managers, including chief executive Pradeep Paunrana, have lost a whopping Sh6.9 billion in employee stock options that are now unlikely to be cashed in with the continuing downward spiralling of the company's fortunes.
The executives, including the company’s director of strategy Navishka Paunrana and former deputy CEO Surendra Bhatia, were to buy the first batch of shares at Sh32 each and the second lot at Sh80.
The trio failed to exercise their rights when the firm’s share price was trading higher and its steady decline to lows of Sh5.5 has eliminated the profit opportunity in the stock options.
“We chose not to exercise our options even though it was our right,” Mr Paunrana, the CEO, told the Business Daily in an interview.
“We did not want to signal to fellow shareholders that it was time to sell the stock. We paid a heavy price.”
Mr Paunrana said he had personally written off the share options, whose existence he deems to hold only theoretical interest, adding that his pessimism is based on the high allotment price and the possibility that a new controlling shareholder could scrap them altogether.
The stock options are also unlikely to be repriced downwards to allow the executives to benefit, he added.
Mr Paunrana lost the most, with the value of his shares having been marked at Sh5.4 billion and was allotted a total of 31.5 million shares at a price of Sh32 apiece but did not buy the units which had a value of Sh1 billion.
He also has a right to buy 55 million shares at a higher price of Sh80 each, a price that UK sovereign wealth fund CDC Group set when it invested Sh14 billion to acquire a 42 per cent interest in the cement maker in 2016.
This second batch of stock, which has not vested, is valued at Sh4.4 billion.
Navishka, a daughter of Mr Paunrana, did not participate in the initial share awards but is eligible for the second offer of 10 million shares valued at Sh800 million and which have not vested.
Mr Bhatia was allotted a total of 9.1 million shares at an offer price of Sh32 apiece, valuing the units at Sh291.2 million. He also has a right to buy an additional five million shares at Sh80 each, valuing this deal, which has not vested at Sh400 million.
The trio collectively has a right to take up to 110.6 million shares or 84 per cent of the 131.4 million units in the scheme that would have earned them major gains if the company had maintained its historical profit growth.
Other members of staff were to take up the remaining 20.8 million shares but they also snubbed the employee share ownership plan (Esop).
Besides losing out on the Esop, Mr Paunrana says he also chose to defer his cash-based compensation to mitigate the company’s liquidity crisis.
“I have not taken a salary for years. I am owed more than Sh300 million. I felt the company needed the money more than I did,” Mr Paunrana said.
The sums owed to Mr ...
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