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Strategies & Market Trends : Stock Attack II - A Complete Analysis
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To: Casaubon who wrote (38922)8/13/2002 10:35:21 AM
From: TimbaBear  Read Replies (1) of 52237
 
Casaubon

actually, if the granted options expire worthless, the company would have saved some labor costs

So...under the method of accounting for options via the Black Box (excuse me, Black-Scholes) system, in this scenario the company would have recorded an expense it didn't have....and you believe this promotes clarity in reporting?

Under the system I propose, where the company is not allowed to have shareholder dilution due to option exercise, the company still would have saved on employess expense, still would not have incurred any expense due to the strategy, and since they didn't have to buy any stock because nothing was exercised, their books both at the time of issuance of the option and its expiration would have been a more accurate reflection of its results.

...the investor would not have to absorb any dilution.

Under my proposal, the investor does not have to absorb dilution in good times for the company or bad times.

...The risk would have been born solely by the employee...

The proposal to expense at exercise doesn't affect the risk the employee assumes. The employee is still getting the option.

. Black-Scholes type calc can have value.

I never said Black Box (oops, there I go again!) didn't have value. I just indicate that the value is not in providing clarity for investors as to the true cost of a company doing business. Black-Scholes may have more effective utilization in options(puts and calls) pricing and evaluation.

Timba
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