By Theo Francis 

Discovery Inc. gave Chief Executive David Zaslav 14.8 million stock options on Sunday, the day before the company and AT&T Inc. announced a plan to merge Discovery with AT&T's WarnerMedia unit, according to a securities filing.

The company valued the option grants at roughly $190 million on Wednesday evening, taking into account the company's share-price volatility and potential stock appreciation over their eight-year term.

The shares underlying the options were valued at $489 million on Wednesday afternoon, as Discovery's Class A stock traded around $33 a share. Discovery shares have fallen about 16% since the start of trading on Monday, shortly after the deal was unveiled. The options are currently trading out of the money, meaning the share price would need to rise over the next eight years for Mr. Zaslav to profit from exercising them.

On Tuesday, Discovery said it had entered into a new, seven-year employment agreement on unspecified terms with Mr. Zaslav, who is expected to head up the combined company.

A Discovery spokesman confirmed that the options stemmed from the new contract, which was approved by the board on Sunday along with the broader AT&T transaction. He declined to comment on the pay agreement's terms.

The options are scheduled to vest -- or become fully Mr. Zaslav's -- over roughly seven years, starting in a year, with about half of them vesting in May 2026 and in 2027, the securities filing shows. They expire in 2028.

The cost for Mr. Zaslav to convert the options into Discovery stock ranges from $35.65 to $43.33 a share, meaning all of the options currently would cost more to cash in than they would yield in shares. The value of the company's shares would have to rise by about 7% from Wednesday's close for some of the options to be worth exercising, and by about 24% for all them to be in the money.

Mr. Zaslav has run Discovery since 2007 and previously ran a business unit for NBC Universal Inc. He has ranked among the current S&P 500's 10 highest-paid CEOs in 10 of the past 11 years, according to data from MyLogIQ, which provides data from securities disclosures.

The executive's compensation for 2020 totaled $37.7 million, Discovery reported in a securities filing last month, down 17% from the prior year and his smallest annual pay package since 2016. His compensation since 2010 has totaled more than $659 million, MyLogIQ data show. Those figures include some equity awards that have yet to vest.

Mr. Zaslav is already a significant holder of Discovery shares, with about 4.13 million Class A and Class C shares, valued at roughly $134 million at Wednesday afternoon prices, according to data from InsiderScore.

Those figures exclude Sunday's options grant, as well as equity awarded to him under his 2018 employment agreement. Equity from that deal that has yet to vest includes nearly 10 million options, about 900,000 appreciation rights linked to the company's stock price, and more than 630,000 restricted shares.

Write to Theo Francis at


(END) Dow Jones Newswires

May 19, 2021 18:05 ET (22:05 GMT)

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