The following is a post of mine at TMF regarding Stock Options with some key emphasis on GMST. I would appreciate any feedback as it relates to my questions/comments on this issue relating to GMST...
Folks,
If you recall, I periodically have discussed Stock Options...what they mean, how they impact us as shareholders, etc. Time to time, Phil Weiss (TMF Grape) posts articles at his Grape's Fisher Kings Board that he comes across on the subject. Here is one from last night...you may want to finish reading my post first, but I encourage you to take a few moments to read the articles. The first link is to Phil's post, the others are to the articles he links to:
boards.fool.com
The Fool on the Hill article:
fool.com
CFO Magazine article:
cfonet.com
(Note: At the time of my writing this post, I have only read TFOTH article)
Proceeding on...other articles I have read lately on this subject have suggested that if the number of outstanding options constitute, say, 8% or more of the shares outstanding, dilution may be a concern. Over the last week, I have studied some of my holdings, those of my Mom's and other companies I follow to see where they stand on this issue, using this metric as a guideline. Here are some of my results:
COMPANY % OPTIONS OUTSTANDING
AOL 19.17
CREE 13.31
DELL 12.37
GBLX 9.80
HD 2.96
INTC 9.14
MEDI 10.61
MRK 7.71
PFE 7.10
QCOM 4.74
RMBS 13.03
VARL 23.94
WMT 1.15
GMST 24.82
A couple of notes before I proceed...I got the number of options outstanding from each of these companies' latest 10Ks. GMST's figures are from the YE 3/31/99 as the most recent year-end cannot be found at FreeEdgar yet...I'm anxious to see what the latest numbers are there...more on GMST below, though. In the instance of VARL, since then, a large number of these options were exercised, so as of today, I think you'll find the percentage is significantly less. QCOM was a surprise to me...I first thought the current low percentage was a reflection of the number of options that were exercised last year due to the tremendous run-up in price...but over the past 5 years, the percentage ranged from 4.75% to 8.00% before declining to the 4.74% shown above. Therefore, it appears to me that the Q consistently keeps stock options well under control.
The big issue with me...and which I would like some thoughts from folks like Tinker and J2B...is GMST. As you can see, they have the highest percentage of those listed above. A few things to be aware of though...some of these options outstanding result from the impact of the merger with StarSight which was integral to their long-term business plan. The other item is that despite the high percentage as of 3/31/99, it has shown significant decline over the years...from 40.89% from the year-ending 3/31/97. But I am somewhat concerned as GMST represents my largest holding at this time and I've recently been impacted by the exercise of options in VARL that temporarily mitigated the latest two outstanding earnings reports. I don't mind short-term effects but I just don't want to see the effect of stock options on my investments, especially my core investments, to be a never-ending source of concern.
Once again, I would appreciate any feedback the fine folks here might have on GMST specifically. Otherwise, I hope you find this exercise of mine to be somewhat educational and enlightening.
Regards,
Scott |
