SEC Investigating Redback’s Stock-Option Grants

Companies often try to sneak out bad news on a Friday night, hoping everybody has gone home, begun weekend partying, and generally stopped paying attention to the workaday technology world.

If you were scanning the news wires this evening, however, you would learn that Redback Networks has received a request from the Securities and Exchange Commission (SEC) for information relating to the company’s historical stock-option grant practices. What’s more, the company also has received a subpoena from the United States Attorney for the Northern District of California requesting documents relating to Redback’s stock-option practices, and the company’s board of directors has launched its own investigation into the matter.

Redback joins a growing number of Silicon Valley companies being investigated for so-called backdating of options, which involves retroactively setting option strike prices at the lowest-possible historical levels so that executives and other employees would reap the maximum rewards from their stock-option allocations.

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