When Hortonworks CEO Rob Bearden took questions from analysts during the company’s earnings call on Feb. 10, Barclays managing director Raimo Lenschow put him on the spot.

Lenschow wanted to know what Hortonworks — the provider of big data crunching Apache Open Source Hadoop — was going to do to stop employee attrition, given how far the value of their stock options had fallen. “Have you changed your planning assumptions for 2016 on the back of that one?” he asked.

Bearden didn’t have a well-scripted answer. Noting that he was "clearly mindful of the share price," Bearden said the company was "taking great measures to be very mindful with our discussions with our Board around how we make sure that we balanced the equity participation with our employee base. And it’s something that we’re very, very focused on right now. We don’t have a particular program in place.”

The Situation at Hortonworks

Santa Clara, Calif.-based Hortonworks, which completed its initial public offering (IPO) in record time, went public in December 2014. But it came under fire in January after filing a registration statement with the US Securities and Exchange Commission for a $100 million secondary stock offering. That's a sizable sum for a company with a total market capitalization of around $600 million, and shares tanked when the news hit.

Hortonworks' stock, which closed at nearly $28 in early August, closed low at $7.44 on Feb. 9 before rebounding slightly. They closed at $10.80 yesterday, just a day after a Pennsylvania law firm revealed it had filed a class action lawsuit on behalf of those who purchased Hortonworks common stock between Nov. 4 and Jan. 15.

In the class action complaint, the Radnor, Pa.- based law firm of Kessler Topaz Meltzer & Check alleges that Hortonworks and certain of its executive officers made a series of false and misleading statements, and failed to disclose material adverse facts, to investors regarding the Company's business, operations, cash position, prospects and internal controls, especially the amount of cash it had on hand for the next 12 months.

Bridging the Gap

So back to that conference call last month. Bearden claimed top management was "very optimistic about the future" of the company's revenue streams "and how we’ll be rewarded for those ultimately via the stock price."

But he added, "we are also mindful of where we are today and want to make sure that we are bridging that gap."

The next day, Bearden quietly cancelled a stock option to purchase 1.185 million Hortonworks shares dated Sept. 12, 2014. 

Bearden "informed the company that he cancelled the option to facilitate making equity grants of approximately the same number of restricted stock units to the company's employees without increasing the Company's equity overhang,” according to the Form 8-K, the report companies must file with the SEC to announce major events that shareholders should know about.

Learning Opportunities

It's worth noting that the conversion price of the securities was $14.22 a share, higher than $7.83 a share the stock closed the day before Bearden voluntarily cancelled the stock option. 

Bearden's total compensation in 2014 was $10.5 million, up from $1.5 million a year earlier. The bulk of that 2014 compensation — $10 million — was a post-IPO option award.

It is unclear how, if at all, Bearden's action affects the class action lawsuit. The attorneys involved in the case were not immediately available when CMSWire contacted the firm this morning.

But one thing is certain: Bearden isn't the only CEO trying to satiate employees after stock prices tank.

Last week re/code reported LinkedIn CEO Jeff Weiner passed over a stock option package worth about $14 million so that employees could have it instead. The story quoted LinkedIn spokesperson Hani Durzy explaining, “He asked the Compensation Committee to take the stock package he would have received and put it back in the pool for employees.”

Twitter’s Jack Dorsey chose to give away one third of his ownership stake — or roughly seven million shares — after a round of lay-offs last October.