Final Thesis: All Aboard the Bandwagon? Employee Stock Options at Caldera Systems

Abstract: Employee Stock Option Plans offer employees an opportunity to participate in a firms’ success. However, employees who face the decision to exercise their options often lack the sophistication of professional investors and are therefore more prone to suffer losses from their investment. This case investigates Caldera System’s employee stock option plan. The Linux business’ initial public offering was shortly before the bust of the Dot-com bubble and employees who exercised their stock options incurred in considerable losses. The case provides the reader with the tools to evaluate Caldera’s performance and form expectations on stock market prices prior to exercising stock options. In the case solution, we combine a quantitative analysis that draws on methods from accounting and finance with a qualitative analysis of Caldera’s business plan and the Linux business. The resulting investment scenarios take the special tax treatment of employee stock option plans into account.

Keywords: Stock options, employee stock options, startups, software startups, open source business models

PDFs: Master Thesis, Work Description

Reference: Maria del Carmen Romero Aranibar. All Aboard the Bandwagon? Employee Stock Options at Caldera Systems. Master Thesis, Friedrich-Alexander-Universität Erlangen-Nürnberg: 2016.