Recently a company in which I own a few shares issued a bunch of options for a portion of their business which was not previously traded publicly. This subsidiary business will begin trading publicly next year under a new symbol entirely separate from the parent company.
I've been trading securities casually for a couple of years, but have never experienced this before (i.e. receiving stock options for a new company in a "distribution" to current shareholders). The cost of the new shares represented by the options were easily within my budget, so more out of curiosity I decided to exercise the options and purchase the shares. I called the brokerage and told them what I wanted to do- they raised no red flags, handled it like any other standard request, and I assumed the transaction would complete without any problems.
The next day, however, I got a call back from the brokerage. The issuing (parent) company apparently was requiring a "Qualified Investor Letter" (or something like that) stating that the entity/individual exercising the stock options had assets totaling at least 100 million dollars or more. In other words, the options were unusable by a "hundredaire" like me, other than to sell them on the options market (which would cost me several times more in transaction fees than the total value of the options). The options were not a "right to purchase" after all, instead they were essentially worthless.
Maybe it's a sign of my own inexperience, but the requirement to have massive backing assets just to exercise stock options kind of rubbed me the wrong way. I can see the parent company not wanting to deal with millions (literally) of small-fry transactions like mine, but isn't the option a legal document? I always thought of a stock option as a legal contract stating "This entitles the bearer to purchase 1 share of XYZ stock before {DATE} at {PRICE}" (regardless of the bearer's identity- anyone providing a contract i.e. option along with the cash value stated would walk away with 1 share in return, period).
Is it common for companies to put similar requirements on issued securities? (Or is what I'm describing just as shady as it seems to me?)