#Japan #Shareholders #Tokyo #stock options #Corporate Governance

Adjustment of Exercise Price for New Stock Options

On May 1, 2025, the company's board of directors decided to adjust the exercise price of stock options following the issuance of new shares through third-party allocation. This adjustment aims to maintain fairness among shareholders in light of potential dilution from new stock issuance. Below are the key details regarding this adjustment:

1. Exercise Price Adjustment

Adjusting the exercise price of stock options is necessary when new shares are issued or when stock buybacks occur. This principle is rooted in the idea of equitable treatment for all shareholders. For instance, if a company splits its shares in half, it results in a 100% dilution as the total number of shares doubles. Accordingly, the exercise price must be adjusted downward to half its original value. In cases where 10% dilution occurs following new stock issuance, the exercise price would be adjusted to reflect 90% of its original price. Conversely, if the company repurchases shares resulting in a 10% reduction, the exercise price would be adjusted to 110% of its original value. This approach is considered standard practice in corporate governance.

2. Effective Date

The new adjusted exercise price will come into effect on May 2, 2025, following the decisions made by the board.

3. Reasons for the Changes

The adjustments are triggered by the board's resolutions made on May 30, 2024, and August 29, 2024, concerning the issuance of new shares through third-party allocations. Additionally, resolutions on February 26, 2025, regarding convertible bonds with stock options, and a simplified stock exchange decided on February 20, 2025, also led to necessary adjustments of the exercise and conversion prices specified in the issuance criteria for stock options and convertible bonds.

Insights from Representative Director Shuhei Komatsu

Shuhei Komatsu elaborated that these adjustments differ from a Moving Strike mechanism. Their primary goal is not to favor specific shareholders but to ensure that no particular shareholder is disadvantaged by the changes in stock structure. This readjustment follows the issuance criteria and aims to treat all shareholders fairly, distinguishing it clearly from Moving Strike situations. Please understand that this process is fundamentally different.

In summary, the company is committed to maintaining a fair and equitable treatment for all shareholders while navigating the complexities of stock issuance and equity adjustments. It is essential for all stakeholders to stay informed about these changes, which reflect the board's adherence to corporate governance principles and shareholder equity.