The academic literature generally concludes that the Black-Scholes model overstates the value of employee stock options (ESOs). In particular, because ESOs cannot be traded, employee risk aversion often elicits premature exercise. As a result, the ESO is less valuable than a traded option. An important factor affecting ESO values has been overlooked in reaching this conclusion. This is the implicit repricing provision in ESOs, whereby the ESO exercise price resets to a lower level if the stock price falls. We develop a new valuation model for pricing ESOs. Our valuation model incorporates explicit repricing rules. Simulations based on various repricing rules suggest that the Black-Scholes model typically understates ESO value. Without a repricing provision, the Black-Scholes model will overstate ESO value, because risk aversion still has a significant effect on ESO value.