On Palm’s generous pre-deal grants…

April 29, 2010

By now, the news that Hewlett-Packard (HPQ) has agreed to buy Palm (PALM) is well known. But one of the things we like to do here at footnoted is look at the filings for interesting patterns once a deal is announced. It didn’t take us long to find this 8-K that was filed on April 16 shortly after 5 pm.

The filing was short and sweet: one executive was leaving and the company was implementing a retention program for “certain key employees” that gave them restricted stock — and, for two employees, SVP for Global Operations Jeffrey P. Devine and CFO Douglas C. Jeffries, an additional $250,000 cash bonus.

While the 8-K didn’t mention how many restricted shares the executives got, Form 4s for six executives, including Mssrs. Devine and Jeffries, were filed around 7 pm that same day. They all show that the grants were unusually generous: ranging from 175,000 RSUs for SVP for Worldwide Sales Dave Whalen to 275,000 for Devine.

Granted, it was no secret that Palm was being shopped around, even though CEO Jon Rubinstein was widely quoted last week as saying that Palm could remain independent. Given this, one could argue that Palm was doing what it needed to do to maintain some semblance of calm in the company’s executive offices.

Still, both the timing and the sheer generosity do seem somewhat unusual. Although we looked back a few years, we couldn’t find other similar grants of restricted shares to Palm executives. The only thing that comes close is the 215,000 restricted shares that Rubinstein received when he was tapped to be CEO last year.

It’s hard to calculate the exact paper-profit since we don’t know what HP plans to do about these shares and won’t know until additional merger documents are filed. In the proxy that Palm filed last August, it states that “If the successor corporation refuses to assume or substitute for the award, the award will vest in full and become immediately exercisable.” But assuming all of those RSUs vest immediately, the April 16 grants to those six executives add up to just over $8 million. In the proxy, the shares that are subject to vesting and held by Mssrs. Devine and Jeffries are valued at $3 million and $1.9 million respectively, though that was way before this current grant.

One other quick thought about that late Friday 8-K. It was filed the same day that Palm filed this 8-K which noted that the company was lowering its revenue guidance. Now maybe this is all just one giant coincidence. After all, as we say often enough, hindsight is always 20-20. Still, it’s hard not to argue that the series of filings at Palm represents an interesting and unusual pattern.

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