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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: LLCF who wrote (157675)3/30/2002 12:03:36 PM
From: Spekulatius  Read Replies (1) of 436258
 
<< A guestimate is better than assigning no value... >>
I agree that options have a value snf consequently issuing options is an expense. However i would argue that the Black-Scholes Formula overstates the value of employee stock options because:
1) there is a vesting period associated with the options. Employee stock options cannot be exercised at will - the option holder must still work for the same company
2) Options cannot be bought at will. If you buy an option on the market - the timing is within your control Employee stock options get granted at a date out of the employees control. Subsequently , in stock market peaks, the granted options can have a tremendous value according Black Scholes but when market deflates they are worthless.
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