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That's not how they calculate the pro-forma expense. If you check
their so-entertaining 1998 10K, one method is:
"Had the Company paid employees in cash the grant date Black-Scholes value of options vested in 1996, 1997, and 1998, the pretax expense would have been approximately $450 million, $620 million, and $850 million."
sec.gov
That number expenses only options that vest, and ignores all new, unvested
grants. Then, when the options vest, it expenses the grant-date BS
value, not the vastly higher vest-date value after appreciation of
the underlying. You can back out the actual grant-date total by
multiplying the weighted average option value ($23.62) by the number
granted (69 million), which approximately doubles the '98 expense to $1.6 billion (and assumes all old grants were expensed in previous FYs).
To inoculate in the market does cost you more (can you get MSFT LEAPs
at a vol of 32%? I can't), but not 10x more. Haven't checked Parrish's version; what does he do? -mb |
