Spring Loading And Bullet Dodging In Stock Awards

Many readers will recall the shocking scandal over stock option backdating in the early 2000s.  The two-day Form 4 filing requirement has made option backdating nearly impossible.  However, opportunities for spring loading and bullet dodging sometimes still occur, especially in times when the stock market is volatile (e.g., the last 12 months!).  Spring loading can occur when a company issues stock options shortly before the release of information that it expects to cause a sharp increase in its stock price, for example, a strong earnings report, an acquisition, or other favorable news.  Bullet dodging can occur when a company holds off on its regularly scheduled annual stock option awards until after the release of information that it expects to cause a sharp decrease in its stock price, for example, a weak earnings report or a governmental investigation.