Echelon Corporation (ELON) Message Board

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Technology Stocks : Echelon Corporation (ELON)

ELON 21.88

+10.1%

Oct 6 5:00 PM EST

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To: tomjoe2 who wrote (2987)	6/13/2002 5:34:17 PM
From: Ted The Technician	Read Replies (1) of 3076

Regarding options expenses... Shareholders should be interested in the aggregate sum of options granted. A few options granted to star performers could be an effective way of motivating exceptional organizational performance which should ultimately increase the stock price. A whole bunch of options granted to everyone including his/her pet fish would likely not be an effective way of improving organizational performance. It might even cause the stock price to drop. Granting options leverages a company's stock and hence its potential for volatility. A motivated work force should increase the company's performance and maybe stock price. On the other hand, if the business is slowing, the work force would be motivated to exercise the option and sell the underlying stock - effecting a overhead supply of stock. How should one determine whether too many stock options are being awarded? The way I would measure the potential impact of stock options to shareholders at the time the option is granted is to value the options at market value. By aggregating the sum of all options granted and comparing it to the current earnings is a good way of measuring exactly how much "value" in options was granted. Think about it... Assume a current ELON stock price of $13. The value of an option, say one that allows someone to buy ELON at $13 at any time between now and three years out, is not zero ( If it is free, I'll take two please! ). That value of such options awarded is not being accounted for today by any company out there. Warren Buffet has voiced his concern regarding how companies are not expensing these options. Silicon Valley tech companies are against having to expense these options. The options expenses are footnotes within the financial reports. Having these expenses appear on the income statement will cause many of the high tech stocks to plummet as investors will be rudely awaken to the true expense of options.

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