Global casino operator Melco Resorts and Entertainment Ltd has created a voluntary scheme for those awarded its share options, whereby they will be able to swap their existing rights, in exchange for restricted shares, and have their existing options cancelled.
Melco Resorts said in a Friday filing in the United States, that the reason for the offer was “as a result of a general decline in the price of our American depositary shares in recent years, all of our outstanding options have exercise prices substantially higher than the current and recent trading prices”.
The company – led by Lawrence Ho Yau Lung – runs casinos in Macau, the Philippines and the Republic of Cyprus.
The firm said that as of April 6, the closing price of one American depositary share on the Nasdaq Select Market was US$7.40, which was equivalent to US$2.4667 per share.
This latter value would be the basis for deciding the number of restricted shares to be granted to awardees under the new scheme.
The American depository shares of the firm were trading at US$6.85 on Friday, versus US$19.95 on April 12 last year, according to Nasdaq data.
Melco Resorts said it had granted restricted shares – and in some limited cases new options – to employees and other people linked to the company, in order to create “a stronger incentive to expend maximum effort for our growth and success,” and encourage “such participants to continue their service with Melco Resorts.”
Melco resorts said on Friday that, given the decline in the price of the group’s American depositary shares in recent years, it believed the original options granted to employees and other people were “not achieving the purposes for which they were intended.”
Melco Resorts’ filing noted: “The purpose of this exchange offer is to promote the interests of our shareholders by enhancing our ability to motivate and retain valued officers, employees and other designated persons.”
It added the move would also reduce the “overhang” of outstanding awards not taken up by eligible employees, relative to “the aggregate number of our shares outstanding”.
Half the restricted shares and new options will vest on the first anniversary of the date of grant, i.e., April 6 this year, and the remaining 50 percent of the restricted shares and new options will vest on the second anniversary of the date of grant.
On Wednesday last week, the parent company, Melco International Development Ltd, said it was cancelling a series of share options previously granted to employees and other people connected to that group. The firm added it was replacing those share options by new ones, under revised terms, including a much lower exercise price.
The move was because the original scheme was longer attractive for grantees, following a sharp decline in Melco International’s stock price.
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