Qualcomm Incorporated (QCOM) Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 168.65

-3.1%

1:07 PM EST

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Stock Farmer who wrote (119246)	5/23/2002 1:22:33 PM
From: Peter J Hudson	Read Replies (2) of 152472

John, <<It occured to me that while I am coming at this whole Option Compensation thing from the perspective of assets, you are coming at it from the perspective of stock price and I would like to understand this point of view.>> John I switched to stock price because that is what you use in your cost to shareholder formula. You use market price at exercise minus strike price to determine cost to shareholders, this is not coming at it from the perspective of assets. My point was that if you are going to use market price to determine cost to shareholders it has to be calculated as the change in market price attributable to dilution. The Shannon formula uses stock price appreciation from time of grant to time of exercise as a cost to shareholders. I say the cost of employee options to shareholders is dilution. The existing shareholders claim on company assets is reduced by the % dilution. However, if you are going to use market price to determine the cost to shareholders you have to show that issuing options had a negative affect on share price. If the market fails to price in the dilution there is no cost to shareholders. Either way, the cost to shareholders is not equal to the appreciation of the option holders share price. <<For example, I think we can both agree with Buffett that a fair price for a share is assets plus the present value of the expected future profits, divided by the number of shares outstanding. Or A/N where A is this total expected asset value and N is the number of outstanding shares. If we don't agree on this, then we're going to have a tough time agreeing on much at all. >> I can agree with that definition of fair price, but you do not use fair price in your calculations, you use market price. I am sure that you and Warren will agree that market price is unfortunately rarely related to fair value. My disagreement with your calculations stems from you using inflated market valuation and treating it like fair value to determine cost to shareholders. Pete

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next