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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: Pirah Naman who wrote (50478)	2/24/2002 10:21:14 AM
From: Uncle Frank	Read Replies (4) of 54805

Pirah, you may have missed this exchange between two parties on the qcom thread regarding the dilutive nature of stock options. *Party 1: A quick scribble with a pencil shows a fair market value of these printed certificates of $10,656 Millions. Yet they recorded only $3,112 Millions in Paid In Capital. The other $7,544 Millions never appeared on the balance sheet by a trick of the accountant's pencil. It just vanished because it left the company as soon as it was received. Party 2*: The $3,112 million in paid in capital represents the strike price of the option grant. That is what the company received for those shares, and what should appear on the balance sheet. The $7544 million represents the stock price appreciation from the time of grant to the time of exercise, this is not a cost to the company or shareholders. If the option strike price is a discount to market price at the time of grant, that difference dilutes shareholder value. What's your take on this issue, Pirah? uf

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