'Jackpot' Is Old News... Nekao Employees Exercise Only One-Third of Stock Options

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The volume of stock option exercises by Naver and Kakao employees sharply declined in the first half of this year. This is because the recent stock prices fell significantly below the stock option exercise prices. Stock options, once considered a 'jackpot' opportunity for IT industry employees, have become worthless.

According to each company's semi-annual report on the 17th, the volume of stock option exercises by Naver employees in the first half of this year was 40,923 shares. Compared to 114,075 shares in the first half of last year, this shrank to about 36%. During the same period, Kakao employees exercised 559,994 stock options, a 24% decrease compared to the same period last year.

The sharp decline in stock option exercises is due to the drop in stock prices, which has rendered the stock options practically worthless. Stock options grant the right to purchase company shares at a set exercise price after a certain period. If the stock price rises above the exercise price, the holder can gain a profit, making stock options more attractive in companies with promising business prospects. In the IT industry, where job changes are frequent, stock options have been used as a tool to attract talent and motivate employees. Especially during the 2021 COVID-19 pandemic, when record-breaking performance was achieved and competition to secure developers intensified, a large number of stock options were granted.

However, as stock prices fell below the exercise prices, the stock options became useless. Naver's stock option exercise prices were about 130,000 KRW in 2019, about 180,000 KRW in 2020, and around 360,000 to 380,000 KRW in 2021. As of the 16th, Naver's stock price dropped to 157,500 KRW. For the 2021 grants, when Naver's stock price peaked at 455,000 KRW, the stock price would need to more than double to realize a profit. Essentially, they have no value.

The situation is similar for Kakao. The stock option prices granted to employees were about 120,000 KRW in 2019 and about 110,000 KRW in 2021. However, Kakao's stock price declined from its 2021 peak of 173,000 KRW to 36,550 KRW. This is about one-third of the 2021 stock option exercise price.

The diminished value of stock options is also reflected in the average salaries of employees. In the first half of this year, the average salary per Naver employee was 76 million KRW. Even excluding stock option exercise gains, there is no difference. This contrasts with two years ago, in the first half of 2022, when including stock option gains, the average salary jumped from 71 million KRW to 84 million KRW. For Kakao, the average salary including stock option gains in the first half of this year was 57 million KRW, which is only 3 million KRW higher than the salary excluding gains. This is minimal compared to two years ago, when stock options nearly doubled the average salary from 50 million KRW to 94 million KRW.

There is dissatisfaction among employees. Given the recent stock price trends, it is uncertain when they will be able to realize profits from stock options received as a form of incentive. Some employees are even choosing to resign and forgo their stock options. Kakao announced on the 14th that it canceled stock option grants for 46 employees who resigned. Naver also announced in December last year that it canceled some stock option grants due to the resignation of 83 employees.

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