Maybe I didn't elaborate enough, you are correct in your breakdown, in this case no value is gain or lost, if cash is paid for the options in the money of course, when shares are sold, the capital come back to you plus the gains, one of the advantage I can see with this plan (never seen it before) is if options are not in the money and their is a critical vote from shareholders (eg. for or againest a takeover) then I 'believe' management can convert at no cash cost even if share price is underwater and use that vote to support their stand