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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs
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To: Exacctnt who wrote (98)6/21/2002 9:31:00 AM
From: BiomavenRead Replies (1) of 786
 
Exacctnt,

A small correction - FAS 128 only looks at the average price for the quarter, not the ending price. (The old "fully diluted" that is no longer used looked at the ending price). Also the tax benefit calculation only applies to NQ options - disqualifying dispositions of ISO's are ignored.

From an investment perspective, the biggest distortion in FAS 128 is that diluted shares are only calculated for companies that are profitable on an operating basis. Thus you have to estimate what the number of diluted shares is for most non-profitable biotechs. (The reason for not reporting diluted shares is that this would appear to reduce the loss per share because there are more shares outstanding.)

Peter
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