Almost three-quarters of FTSE-100 companies' employee share options are now underwater, according to research published by law firm Norton Rose.
The study found that of the FTSE-100 companies which granted sharesave (save-as-you-earn) options in 2007, 72% of their share prices have fallen to such an extent that the options they granted are now worth less than the share price, despite most options being granted at an initial 20% discount.
The law firm says, according to official HM Revenue & Customs statistics, between 500,000 and 600,000 sharesave options have been granted annually since 2005. Taking FTSE-100 companies as a representative sample, it estimates more than three-quarters of a million of these sharesave options are now worthless. The financial services sector was worst hit, with an average 43% increase in share value needed to make options worth exercising.