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Technology Stocks : DELL Bear Thread
DELL 138.22-1.6%3:59 PM EST
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To: Bilow who wrote (952)5/31/1998 10:21:00 AM
From: rudedog  Read Replies (1) of 2578
 
Carl -
Excellent post, this clears up many of the issues about the effects of options on the balance sheet, at least in my mind.

I have not seen anything on the web about non-convertible options, like you my experience has been from discussions with the finance guys inside companies actually doing this. I don't think there is any real difference from a balance sheet perspective between convertible and non-convertible options. There is a difference to the employee because the income from non-convertible options are treated as ordinary income not cap gains for tax purposes.

As you say (and Chuz has pointed out many times) selling or purchasing shares, and satisfying option grants are completely unrelated. I explored the question of the effect on cash of these activities with a friend who knows more about this than I do, and he agreed with you that the creation of this money by issuing treasury stock has the perverse effect of creating cash for the company. Likewise the purely paper difference between the amount of the cash generated (at the strike price) of stock which costs the company nothing, and the sale price becomes an expense which reduces income and DOES go on the balance sheet.

This stuff makes my head hurt, that's why I went into engineering...
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