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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 232.26+1.9%3:46 PM EST
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To: GST who wrote (145134)8/12/2002 10:46:39 AM
From: Wizard  Read Replies (3) of 164684
 
>>When options are expensed, the value of "the premium" is what will get expensed.

Yes, the premium may or may not get expensed but so what? Valuation is determined by long-term cash production and the share count. There is no cash involved in the premium and you don't get diluted by the premium, just the shares. I understand that reported earnings will be cut if FASB decides to expense options. That is the accounting. What I am saying is that it doesn't matter so long as you don't get diluted by more than we previously assumed. Since all the dilution metrics are broken out in the SEC filings for every public company, it is all in black and white. Of course, there could be a high profile tech-oriented fraud case which would certainly beat the stocks up and may casue a public outcry but barring that, this is an issue that is just about formatting an accounting issue, not one of valuation. In effect, what I am saying is that investors will 'look-through' non-cash charges just as they do for merger accounting and IPO based stock compensation.

We will see what DELL has to say about this on Thursday. Maybe DELL's operating margins are 3% instead of 9% if we expense options. Do you really think that matters with regard to DELL's valuation? Do you really think it will drop by 2/3. Of course not. It won't drop on that at all. There is no change to cash and no change to dilution.
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