Ref-<You may find out that the majority of
options get exercised at $2.50 - $5.00-10.00
range. But these shares needs to be bought at
current price, and even at deeps it was about $80.
Do your math, and the difference clearly goes
into employee pockets. This is still called
as "compensation package", and therefore the cost
of this sell-buy transaction is clearly
a Salary Expense. Indirectly. So indirectly that
it is tough for some to understand>
The stock options do not work as you think. First the company buys the stock on the open market. Then it will grant an option to the employee, at the market price of the stock on the day of the option. From now on the company holds that stock . As the stock appreciates the company liability is nullified, since the company already holds that stock. Yes, the company loses the ability to profit from the appreciation of the stock which it is holding, and is denied a return on the risk it has taken for holding that stock. Buying a stock on the open market for past options is unthinkable, because of the unlimited upside potential liability, and the accountants and the SEC regulators would have a fit.
In years past Intel annual report had a section on sources of capital. A big source of capital was employee stock purchases, and purchase of options.
The company never buys the stock on the market for past options. It only buys for future options, employee stock purchase plans, or to be used for mergers. That is the way stock options work for most companies including AMD. Most cash shy companies elect not to buy stock on the open market. They authorize more shares to be issued, and instead of selling the extra shares to the public, use the extra authorized shares for stock options or employee stock purchase plans. Long term this dilutes the existing shareholders. Intel has the luxury of sitting on a huge pile of cash, and elects not to dilute the existing shareholders. |
