OG,
I guess I see your point, but I still disagree and think you are leaving some things out.
I'll take an example of a friend I know who got into the right Silicon Valley company at the right time.
He got founders shares, no strike. They went public a few years ago.
The stock is currently over 90% off its highs.
At the high point, his options were valued at over $50 million, but now would be a little less than $3 million.
Of course, he and every other damn person in the company started bailing right at the top and continued to all the way to the bottom. I mean, what's the difference if you're selling at $20 or $200, it's all free money for them, right?
Anyways, the personal accountants that all the executives were seeing recommended diversifying. So they did.
Let me ask you this, would current shareholders be happy knowing that my friend has over $5 million in T-bills when his granted options would currently be worth under $3 million? [that's just t-bills too] Don't you think they would feel cheated? It was the company insiders that were dumping like mad that helped move that stock price down.
This is an extreme example, but I think you should be able to see how the same type of behavior by Cisco insiders has an impact on share price.
As to your argument about the purchaser and the grantee getting in at the same price. My argument would be that this granting of options has been abused. Then it's not the employee that's screwing the shareholders, it's the company itself screwing the shareholders. Ever look at how many companies have more insider selling than revenue? ONe of your favs JNPR falls into this category. If the company has issued so many damn options that insider sales outweigh revenues, something is seriously wrong IMHO.
I hope now that Levitt is gone, the SEC looks at this excessive granting of options and does something about it.
[btw- I've been granted options, so it's not like I'm bitter by not getting any. Anyway, you know with my belief of where the market is going I think most outstanding options will never be exercised]
chic |
