Reading Atlassian's (TEAM) annual report for 2017, I came across the following sentence:

Net cash provided by financing activities was $2.3 million for the fiscal year ended June 30, 2015 as a result of proceeds from exercises of employee share options.

What on Earth does this mean?


Many companies (particularly tech companies like Atlassian) grant their employees "share options" as part of their compensation. A share option is the right to buy a share in the company at a "strike price" specified when the option is granted.

Typically these "vest" after 1-4 years so long as the employee stays with the company. Once they do vest, the employee can exercise them by paying the strike price - typically they'd do that if the shares are now more valuable. The amount they pay to exercise the option goes to the company and will show up in the $2.3 million quoted in the question.

  • Often (based on a sample-size of one – the company I work for) the strike price for the options is at a small/modest discount to the current share price at the time the options are granted. This gives the employees an immediate "paper profit", although – as Ganesh says – they usually cannot realise that profit for a few years until the options "vest". The discount gives some protection should the share price remain around the current level, but the intention is that employees are spurred-on to make the company successful as any rise in the share price increases their benefit from the options. – TripeHound Sep 27 '17 at 7:59

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