mindmeld - seems whenever you hold a long position your lose your grip on the facts <ggg>
if they passed the stock options expense law, then what they would deduct from the income statement is the amount of tax benefit that accrues to the company from the exercise of stock options.
No. Turns out tax benefit would be ADDED to earnings after the corresponding cost of options would be SUBTRACTED.
Here's how it works. Assuming tax rate is 35% then in your example 51 M$ is 35% of the total reported cost. Means the cost reported to the IRS is 145 M$. Under the bill, they'd have to have reported at least this much cost to shareholders. They'd be nuts to report more.
So EBT would drop by 146, which would reduce taxes payable by 51 M$ and EAT would drop by 96 M$. Still a small number.
That is, of course, if they are reporting the same cost of options to shareholders as they are to the Government. If passed, the bill allows them to report less, just not more.
As far as I think last I checked the weighted average price of options was $22. The stock now trades at $14 or so. Like I said...worthless, again here are facts as of last 10-K (July '01)
Total outstanding: 1,060 million
Average exercise price: $29.41 (mostly harmless)
However, that doesn't mean all options are worthless.
226 Million are outstanding with strikes less than $9 with average price of $4.45. That will cost Cisco shareholders 2 B$ worth of dilution (3 B$ to buy back, minus 1 B$ exercise) even if your investment at $14 breaks even with the mattress. More if you happen to profit.
Another 255 million are outstanding with strikes ranging from $9 to $19, average price of $13.98. If your wishes come true and the stock really is worth $20, then these shares will end up costing another 3.4 B$
Worthless? A billion here, a billion there... pretty soon you're talking real money.
John |
