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Strategies & Market Trends : Value Investing

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To: TimbaBear who wrote (15078)	8/6/2002 10:42:02 AM
From: Jurgis Bekepuris	Read Replies (1) of 78594

Timba, >>Had the stock done badly, then many of the options >>would have expired worthless and the company also >>would have been able to buy back more of its shares >>for the same amount, but shareholders would, of course, >> be worse off today. >I don't follow your reasoning here. The reasoning is correct. If stock tanks, the options expire worthless, there is no dilution and no need for stock buyback. Also the buyback is cheaper unless locked in by selling puts. So all cash flow is saved. BUT! THERE IS A BUT! But this is only true if the company does not grant more and more new options as the stock tanks... Jurgis - which is exactly what happens... :-(((

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