"If Intel was buying back shares at market value and giving options to employees with a strike price (grant price) of market value, how is that giving money away?"
Your logic is faulty. First, Intel was not buying back
that many shares 10 years back. Second, if they bought shares
then, they did not give those material shares to employees,
they give them an option, a promise, a vapor, to give those shares
much later, when they are fully vested. Nothing was given
yet to a particular employee, and no cash nor
any other material transaction has occurred. Third,
a company does not buy and hold those shares that are
promised as options. Even if this would be the case, the
company would give away current (I presume bigger)
value for less, so the difference would be still an
operating loss for the company.
"If and when the options are vested and later get exercised, the employee pays Intel the previous market value"
Who cares what was the "previous" market value,
it is immaterial, especially when taking into consideration
all these "ifs and when". What is material _today_ is that
when an employee decided to exercise that old deal,
the company has to get those shares from somewhere. Today.
My position on this matter is very simple. If the company
buys those material shares on open market and
gives them to the employee to fulfill the old option
contract, they incur a direct expense, therefore this
labor compensation expense must be subtracted from current
earnings. If they simply issue new shares, then
"shareholder be aware", I would not care.
"This is revenue neutral as far as I can tell."
I am not an accountant <;-)>, but I believe that
a transaction
"buy 10 years ago, hold, and sell today for the same price"
does not fall under any definitions of "revenue".
- Ali |
