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 (2989)	6/15/2002 1:23:16 PM
From: Ted The Technician	Read Replies (1) of 3076

Tomjoe2, I believe that looking at one executive's capital gains to expense/revenue ratio is only a piece of the puzzle. As with other ratios, it should be used to raise questions rather than determine definite conclusions. A high ratio would lead me to ask the question as to whether the capital gain is "excessive". I would consider the gain "excessive" if the ratio is high and the gain was realized only over a very short period or the net profit to the shareholders was relatively low. A high ratio would raise the question "why sell if the company is really a bargain" (and please don't answer with the classic "for diversification planning" reason)? Stock dilution is a helpful way of measuring the impact of options. I think it is also only a piece of the puzzle. Stock dilution by itself does not account for the stock's potential for volatility, nor does it account for the duration of the option. For the first item, a highly volatile stock might increase the chance of the option being executed and hence increase the chance of the stock being diluted. For the second item, a 100-year option has a higher chance of being executed than a 1-second option. Expensing options would force options to be valued at market value that accounts for both the volatility and the duration of the option. I believe that high-tech companies often issue stock options. Whether a company issues options or to whom it issues options to by itself is not an issue for me. It is the aggregate sum that is important for me. I believe that this amount has been excessive for many high-tech companies; and, many shareholders are unknowingly paying for it. When taken to the extremes, the more money that a government prints, the less the money will be worth. Likewise, when taken to the extremes, the more options a company prints, the less the stock will be worth. The issue here is how to determine that point of extremity. Warren Buffett doesn't award options to his employees. Why not award salary with bonus when appropriate? Salaries and bonuses are expensed. Thanks to the jury for the Andersen verdict! One step in the right direction for shareholders! P.S. Andersen was the former auditor of Enron.

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