Stock options are a powerful promise. When a company offers employees the chance to own part of the business, the message is clear: “Grow with us, and you’ll share in our success.” We have seen, through our work at EWS Limited, how these programs often help drive effort, bring teams together, and support retention in competitive markets—especially for fast-moving tech startups and established IT companies.
But markets change. Valuations fluctuate. Sometimes, the price that once looked like a launchpad for future wealth becomes an anchor holding motivation back. When that happens, we face a tricky question: Should we reprice stock options to restore motivation and alignment with business goals? That’s what we explore here, based on years partnering with scaling businesses across borders and sectors.
Stock options rely on one simple hope: Over time, the company will be worth more than the starting price baked into every option grant. But downturns and sector shocks are common, especially in tech. Suddenly, valuations dip. The “exercise price” (the set price at which an employee can buy their shares) now sits above the current fair market value (FMV) of the shares. In plain language, exercising stock options costs more than just buying shares outright on the open market.
We call these “underwater options” or “out-of-the-money options.” It’s frustrating for employees who once counted on those options as part of their rewards. For the company, the hit is deeper:
Underwater options don’t inspire—at best, they’re ignored. At worst, they damage morale.
Staring at a deflated equity plan, many leadership teams ask if option repricing is right. From C-levels to global mobility managers, the conversation comes up the moment retention and morale waver.
Stock option repricing means lowering the exercise price on existing grants to match the lower market value. It’s not automatic—and requires careful steps. The aim: to restore value so teams once again feel invested in the company’s future.
We’ve seen companies reprice for several reasons:
Most companies run repricing programs for all current employees, but sometimes limit eligibility to certain groups like executives. Rarely, ex-employees with unexercised options are included, but that’s not standard.
Option repricing is usually about the current workforce. Companies broadly include:
On the other hand, most firms exclude:
The mix depends on company policy, board guidance, and the specific language in the grant agreements.
Changing the terms of stock options is never just a simple “reset.” Laws, tax authorities, and plan rules create a web of effects, especially for global employers—like many of our partners at EWS Limited. Let’s talk about the key details.
Repricing options in the US is considered a fresh grant. It triggers new timelines and rules under the Internal Revenue Code, especially if the original grants were Incentive Stock Options (ISOs):
For employees, repricing usually resets the clock on key tax milestones. For companies, careful plan administration is now required to avoid unintended tax bills.
Elsewhere, local tax rules shape the consequences. In our experience advising companies expanding into Australia, Belgium, Ireland, Canada, and many more, we’ve seen:
Each country’s revenue authority views repricing differently, so global HR and payroll teams must coordinate with legal and tax experts.
Before pulling the trigger on repricing, companies need to review:
If your company crosses borders—from the UK to Australia or Belgium—working with a team like EWS Limited makes it easier to keep everything on track. We recommend our article on cross-border equity vesting for a closer look at managing plans in tech startups and international teams.
Repricing options is not just a people decision. It comes with real impacts on your books. Under the relevant accounting standards (such as ASC 718 in the US), changing the exercise price of options means the company recognizes an incremental compensation expense.
This incremental cost represents the difference in value between the old option and the new one, based on established financial models (like Black-Scholes). For startups and scale-ups, especially those reporting to investors, it’s wise to:
Proper record-keeping is vital, especially across multiple jurisdictions. Mistakes or omissions here can cause headaches in due diligence, audits, or future funding rounds.
In most companies—especially private firms and earlier-stage businesses—the board of directors can approve option repricing on its own. Shareholder votes are usually not required, unless:
Some situations need more caution:
We have found that clean record-keeping and up-to-date grant documents make future audits and funding rounds move much more smoothly.
Clarity is power—keep your equity paperwork simple, current, and in order.
Few people read every word of their original stock option agreement. Many employees don’t follow valuation changes unless there’s an IPO or acquisition in sight. That’s why clear and honest communication is at the heart of any repricing project.
We always recommend:
Investors sometimes raise concerns. They may see repricing as bringing in less potential cash to the company, or as resetting the incentives—the conversation has to then balance financial needs and the need to keep valuable people motivated.
Transparency beats rumors—communicate clearly, even if the conversation is hard.
In many cases, a one-page written notice (often delivered by email or through a secure HR portal) is enough to explain:
For teams unfamiliar with company valuations or cap table management, this moment is an opportunity to build trust and show fairness. If you need help designing internal communications or legal notices, we can support this as part of our broader HR and workforce solutions at EWS Limited.
Usually, there is no need to rewrite the original agreement after repricing. The new exercise price often stands on its own, documented in a new grant or an amendment notice.
Exceptions include situations where expiration dates change, vesting schedules are altered, or if the options must change type (from ISO to NSO, for instance). When in doubt, asking for signed consent, even if technically not required, can help avoid later disputes or confusion. We have seen that a single page amendment or “repricing notice” suffices in most cases.
Poor or delayed communication puts companies at risk. Employees may:
For these reasons, it is best that communication about repricing is:
Successful companies we have worked with even connect repricing with broader HR strategies—like advancing employee experience and retention goals or adapting to global expansion.
Global teams and fast-growing startups often need a better way to handle underwater equity. That’s why we offer solutions like Remote Equity at EWS Limited, designed for busy HR leaders, CEOs, and their finance teams.
With Remote Equity, we help by:
If you want to know more about moving your global workforce forward with confidence, we invite you to learn about building a strong employer brand and why marketing automation matters for recruiters.
Stock option repricing, when handled with care, can restore motivation, rebuild trust, and support retention—especially after a tough period for your business. It is not a quick fix, but a tool that, when properly managed, aligns the interests of your company and its people once more.
At EWS Limited, we handle every detail with expertise, from compliance and global tax, to communication and admin. We know what works—and where to tread carefully. If you are facing underwater options, or plan to expand and build a future-ready equity program, reach out to discuss how Remote Equity and our suite of solutions can support you.
For more insights on workforce management, global hiring, and remote work trends, we encourage you to subscribe to our newsletter. Stay at the forefront of global employment with us, so you can keep your people moving forward, together.
Stock option repricing is when a company changes the exercise price of existing employee stock options to a lower, current fair market value after a price drop in the company’s shares. The goal is to make options valuable again for employees and boost retention and morale. It’s often done during market downturns, especially at tech and startup companies.
Underwater equity leaves employees with options that cost more to exercise than the current value of the shares. When options are underwater, employees rarely exercise them and may feel less motivated or valued. This can lead to retention problems and lower morale until the underlying company value grows again or options are repriced.
Repricing options can be a smart way to renew motivation, support retention, and keep teams focused when company value has dropped. It restores the alignment between personal and company rewards. However, it comes with legal, tax, and administrative complexities, so it should be handled carefully and communicated clearly to avoid friction.
To reprice options, companies typically get board approval, review grant agreements, and check local laws and tax rules. The new price must be set at or above current fair market value. Employees should receive a notice about the change. Special care is needed to follow compliance factors in every country where staff are based. Often, a single-page amendment or communication is used to document the repricing for each employee.
Risks include creating unfairness for employees whose options are already “in the money,” causing confusion if communication is poor, triggering unexpected tax or legal problems, or facing criticism from investors. Repricing also increases compensation expense and may involve new compliance burdens. Careful planning, legal review, and clear communication help minimize these risks and ensure the intended positive effects.
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