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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: hueyone who wrote (43775)	6/22/2001 12:08:22 AM
From: Pirah Naman	Read Replies (3) of 54805

Huey: Here's another way of looking at it. Kind of silly maybe, but...I'm going to make up a term for this - net cash flows - as what I will be discussing is not exactly the FCF we all know and cherish. We can take any company which has multiple sources of net cash flows and estimate a value for those net cash flows. Perhaps a software company has product sales and services. These two lines of business have different cost structures, growth rates, and so on. We could ignore synergies and determine a value of reach line of business, and sum them up to get a total value. If we accept this line of thought, then we could consider the employee options and stock programs to be yet another "line of business." While that might seem to be separating things out too much, these "operations" do get their own lines on the statement of cash flows. So we could estimate the value of these net cash flows. The problem, however, is that the magnitudes of these cash flows are dependent upon the pricing of the stock. In other words, the value becomes dependent upon the price . If nothing else, this illustrates the circular nature of the entire employee options game. - Pirah

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