How Steve Jobs Blew $10 Billion

So, you bought a house right before the property bubble burst? Got out of gold a year ago? Invested in Pets.com back in the 90s? Well, guess what? No matter how many dumb investment decisions you’ve made, they likely pale next to a little mistake Steve Jobs made a few years ago, which cost him about $10 billion. Ain’t schadenfreude grand?

Back in 2003, according to Marketwatch, Jobs traded in some “overpriced” Apple options for a smaller number of shares, in a sort of “bird in the hand” deal that left him with more money, assuming that Apple’s stock price never shot through the roof again.

Stock options they had been granted during the boom now seemed completely worthless. After all, Apple stock would have to climb all the way back up to those giddy heights before the options even started to show a profit again.

As for Jobs: He volunteered to cancel all his options in return for a far smaller number of shares, worth about $75 million at the time. The trade made sense — unless Apple boomed again.

Ahem.

The shares Jobs received are worth $2.5 billion at today’s stratospheric prices.

But what would those options have been worth?

Digging through the old proxies reveals a remarkable tale.

Jobs held 15 million options at an exercise price of $9.15, which meant they started to gain value only if Apple stock exceeded that price, and 40 million options at an exercise price of $21.80. Apple at the time was little more than $7 a share. (These prices have been adjusted to reflect the subsequent stock split.)

Total value: $12.8 billion.

In other words, Steve Jobs missed out on $10.3 billion in extra profits.

To be fair to Steve, nobody could have known how high Apple’s stock would go in subsequent years — even the man largely responsible for driving it to such lofty heights. However, this wasn’t the first time the Apple co-founder lost big by betting against his own company. Back in the 80s, when he was booted out of Apple by then-CEO John Sculley, Jobs sold off all of his Apple stock — 6.5 million shares — for about $70 million. You don’t even want to know how much they’d be worth now.

Apple’s Jobs blunders on options swap Brett Arends’ ROI [MarketWatch]
Apple History [Markus Ehrenfried]