Form 4: FIGS CEO Sells Shares, Reprices Options

FIGS, Inc. CEO Catherine Spear sold shares to cover taxes and repriced a significant stock option grant, lowering the exercise price to $6.63.

Summary

• CEO Catherine Spear sold 65,866 Class A Common Stock shares at $6.88 each on August 13, 2025.
• The sale was pre-planned under a 10b5-1 instruction letter and solely to cover required taxes and fees due upon the vesting and settlement of Restricted Stock Units (RSUs).
• A stock option grant for 727,097 shares, originally granted on May 26, 2021, with an exercise price of $22.00, was repriced to $6.63 per share on August 12, 2025.
• The repriced options will now vest in 24 equal monthly installments, with the first installment vesting on September 12, 2025, while the expiration date remains May 25, 2031.
• Spear's direct beneficial ownership of Class A Common Stock is 1,969,246 shares, which includes 1,460,886 RSUs.
• She also holds 5,469,161 Class B Common Stock shares (convertible to Class A) and 18,958,606 Class A Common Stock shares underlying other vested options, which are not reported on this Form 4.

Sentiment

Score: 3

Explanation: The filing indicates a significant decline in the company's stock price, necessitating a stock option repricing for the CEO. While the share sale was for tax purposes, the repricing of a fully vested option from $22.00 to $6.63 reflects substantial underperformance and a need to re-incentivize management, which is generally a negative signal for investors.

Positives

• The sale of shares was for tax purposes, not a discretionary sale, indicating no negative sentiment from the insider regarding the company's future prospects.
• The stock option repricing aligns the exercise price with the current market value, potentially re-incentivizing the CEO and re-tying her compensation to future stock performance.

Negatives

• The stock option repricing indicates a significant decline in the company's stock price from the original option's exercise price of $22.00 to the new price of $6.63.
• The repricing of a fully vested option suggests a need to re-incentivize management due to underperformance relative to the original grant price, which can be viewed negatively by shareholders.

Risks

• Stock price volatility impacting the effectiveness of executive compensation plans.
• Potential shareholder perception issues regarding executive compensation adjustments, particularly option repricing, which can be seen as rewarding underperformance.
• Reliance on 10b5-1 plans for insider sales, which, if not clearly communicated, can sometimes be misinterpreted by the market.

Future Outlook

The repriced options will vest in 24 equal monthly installments, with the first installment vesting on September 12, 2025, extending the incentive period for the CEO and tying future compensation to the company's stock performance from the repricing date.

Management Comments

• The sales were made pursuant to a 10b5-1 instruction letter delivered to the issuer on May 13, 2025, and none of the shares reported as sold on this Form 4 were sold for any reason other than to cover required taxes and fees.
• The transactions reported herein reflect a one-time stock option repricing (the 'Option Repricing') effective on August 12, 2025 (the 'Repricing Date'). The Option Repricing applies to 727,097 fully vested options originally granted to the Reporting Person on May 26, 2021 with an original exercise price of $22.00. Pursuant to the Option Repricing, the exercise price of the repriced options has been amended to reduce the exercise price to $6.63 per share, the closing price of the Issuer's Class A Common Stock on the Repricing Date. The vesting schedule of the repriced options has also been extended as reported herein. There is no change to the expiration date of, or number of shares underlying, the repriced options.

Industry Context

Stock option repricing often occurs in industries where company stock prices have significantly underperformed, leading to 'underwater' options that no longer serve as an effective incentive. This practice aims to re-motivate executives by resetting their incentives to a more achievable level based on current market conditions, particularly in sectors experiencing market downturns or increased competition.

Comparison to Industry Standards

• Stock option repricing, while legal, is generally viewed unfavorably by corporate governance advocates as it can dilute shareholder value and reward management for poor stock performance. Historically, companies like Apple (2001) and Microsoft (2004) have repriced options, often facing criticism for such actions.
• The repricing from $22.00 to $6.63 represents a substantial reduction (approximately 70%), indicating a significant decline in FIGS' stock value since the original grant date. This magnitude of repricing is more severe than typically observed in stable, mature industries and suggests significant challenges.
• The extension of the vesting schedule for repriced options is a common practice to re-tie executive incentives to future performance, similar to how some technology and growth companies structure performance-based awards to ensure continued commitment.

Corporate Governance

Related Party Transactions

• Indirect beneficial ownership of 797,073 Class A Common Stock shares held by the Catherine Spear Revocable Trust.
• Indirect beneficial ownership of 141 Class A Common Stock shares held by Hollywood Capital Partners LLC, where the Reporting Person is a managing member and disclaims beneficial ownership except for her pecuniary interest therein.

Stakeholder Impact

• Shareholders: Potential dilution from repriced options; concerns about executive compensation practices in light of stock underperformance.
• Management: Re-incentivized through lower option exercise price, potentially improving morale and retention.

Next Steps

• The repriced options will begin vesting in 24 equal monthly installments starting September 12, 2025.
• Investors may refer to Part II, Item 5. 'Other Information' in the Issuer's Form 10-Q filed on August 7, 2025, for more details on the Option Repricing.

Key Dates

Recommendation

The stock option repricing indicates significant past underperformance, which is a negative signal. However, the repricing also re-aligns executive incentives with the current stock price, potentially motivating future performance. The sale of shares was for tax purposes, not a discretionary sale, which is neutral. Given the mixed signals—past underperformance but renewed executive incentive—a 'hold' recommendation is appropriate until further financial results or strategic updates are available to assess the effectiveness of the repricing and the company's future trajectory.

Keywords

FIGS Inc., Catherine Spear, SEC Form 4, Insider Trading, Stock Option Repricing, Executive Compensation, Restricted Stock Units, 10b5-1 Plan, Healthcare Apparel