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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: Ted The Technician who wrote (2988)6/14/2002 3:58:07 PM
From: tomjoe2  Read Replies (1) of 3076
 
Ted, here's a response over at RagingBull to one of your posts on the options issue, from bigredanalyst:

ragingbull.lycos.com

This analysis is nonsense, IMO. It is meaningless to compare the capital gains realized by the option holder with the
operating expenses or revenue of the company and draw any meaningful conclusions.

Options exercised today were probably granted five years ago, pre-IPO when the company was worth considerably less. So of
course the captail gain to the option-holder is large. If it weren't they'd never exercise the option.

A more meaningful analysis is to compare the options granted in a year with the total shares outstanding. It shows the
maximum amount of dilution a shareholder will face in the future as a result of the option grant.

In 2001 Echelon granted 2.5M shares worth of options to employees. This represents about 6.7% of the 37.5M shares that
were outstanding. Most tech companies (where options represent a large percent of employee comp) issue about 5%-10%.

But Echelon's options went mostly to the troops, not top executives. Oshman got 250,000 shares and the other four top execs
each got 50,000. So 2.05M (82% of the total grant) went to other than the top five execs.

Hardly the stuff to get excited about executives lining their own pockets at company expense.
______________________

I think I tend to agree that the interest to shareholders at this point is the absolute number of options being handed out, with secondary issue of exercise price as indication of whether compensation is excessive. If ELON hands out 2m options I don't see how it truly affects earnings or revenues, even if S&P and others want to account for it as an expense. But it does go directly to issue of whether the value of owning a share today will be negatively affected by an increased float down the road.
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