Repricing of employee stock options
I've been following your discussion of repricing. I have no experience with it, so can't really add to that topic.
However, as to your objections to the "fair value method" of SFAS 123: What is so difficult about estimating volatility and option life?
As to volatility, why can't you just use the historical volatility for the stock prices for the last 5 years? No estimating required. Do accountants really think they can guess better for the next 5 years .. than what history has showed them to be true for the last 5 years? Or is this an opportunity to understate the grant expense by low-balling the volatility estimate?
As to option life, why estimate that? Why not just use the contract interval? (That would be time interval between the grant date and the expiration date, I think.) Or is this yet another opportunity to understate the grant expense?
A 9-month option on the open market isn't priced as if it were a 3-month option. There is additional time value for those last 6-months. That additional value should be included in the option premium, should it not? Using an estimated option life of 3 years (for example) when the grant-to-expiration term is 9 years seems like the same thing to me.
Ron
P.S. Biomaven, David Howe, John Metcalf, Londo, Michael Young, rkrw, Rocky 9, and any and all interested posters ...
I've started a new "Employee Stock Options - NQSOs & ISOs" thread at Subject 53027. Please stop by and at least post a "hello". |
