Stock Options and Other Share-Based Awards Stock Options and Other Share- Based Awards |
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| Stock Options and Other Share-Based Payments | Stock-Based Compensation Certain QVC employees and officers may receive stock options ("Options") and restricted stock units ("RSUs") in Series A Qurate Retail common stock (“QRTEA”) in accordance with Qurate Retail's Incentive Plan (the "Qurate Incentive Plan").
In 2021, holders of QRTEA shares received a special cash dividend ("Special Cash Dividend") in the amount of $1.25 per common share. As a result, the outstanding Options of QRTEA were adjusted pursuant to the anti-dilution provisions of the Qurate Incentive Plans under which the Options were granted. Adjustments to the exercise prices and the numbers of shares subject to the original awards were made to preserve the intrinsic values prior to each Special Cash Dividend. Outstanding RSUs received the Special Cash Dividend which was subject to the same vesting schedules as those applicable to the corresponding original QRTEA RSU.
(a) Stock options
A summary of the activity of the Qurate Incentive Plans with respect to the QRTEA Options granted to QVC employees and officers as of and during the year ended December 31, 2021 is presented below:
Upon employee exercise of the Options, the exercise price is remitted to Qurate Retail in exchange for the shares. The aggregate intrinsic value of all Options exercised was $15 million during the year ended December 31, 2021 and $2 million for each of the years ended December 31, 2020 and 2019.
The weighted average fair value at date of grant of a QRTEA Option granted during the years ended December 31, 2021, 2020 and 2019 was $5.70, $1.97 and $4.08, respectively.
During the years ended December 31, 2021, 2020 and 2019, the fair value of each QRTEA Option was determined as of the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:
Expected volatility is based on historical and implied volatilities of QRTEA common stock over a period commensurate with the expected term of the options. The Company estimates the expected term of the Options based on historical exercise and forfeiture data. The volatility used in the calculation for the Options is based on the historical volatility of Qurate Retail's stocks and the implied volatility of publicly traded Qurate Retail Options. The Company uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject Options.
The fair value of the Options is recognized as expense over the requisite service period.
During the years ended December 31, 2021, 2020 and 2019, the Company recorded $9 million, $17 million and $22 million, respectively, of stock-based compensation expense related to the Options. As of December 31, 2021, the total unrecognized compensation cost related to unvested Options was $15 million. Such amount will be recognized in the Company's consolidated statement of operations over a weighted average period of 2.5 years.
(b) Restricted stock units
A summary of the activity of the Qurate Incentive Plans with respect to the QRTEA RSUs granted to QVC employees and officers as of and during the year ended December 31, 2021 is presented below:
During the years ended December 31, 2021, 2020 and 2019, the Company recorded $32 million, $16 million and $17 million, respectively, of stock-based compensation expense related to these awards. As of December 31, 2021, the total unrecognized compensation cost related to unvested RSUs of common stock was $53 million. Such amount will be recognized in the Company's consolidated statement of operations over a weighted average period of 2.7 years.
Fair value of RSUs is calculated based on the market price on the day of the granted shares. The weighted average grant date fair value of the QRTEA RSUs granted to QVC employees and officers during the years ended December 31, 2021, 2020 and 2019 was $11.58, $4.51, and $16.83, respectively.
The aggregate fair value of all RSUs of common stock that vested during the years ended December 31, 2021, 2020 and 2019 was $38 million, $7 million and $16 million, respectively.
As of December 31, 2021, the Company had approximately 117,000 unvested RSUs of Qurate Retail 8.0% Series A Cumulative Redeemable Preferred Stock held by certain officers and employees of the Company. During the year ended December 31, 2021, the Company recorded an incremental $3 million of stock-based compensation expense related to these shares and the total incremental unrecognized compensation cost related to these awards as of December 31, 2021 was $4 million. Such amount will be recognized in the Company’s consolidated statements of operations over a weighted average period of 2.2 years.
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