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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!
LRCX 165.05+5.9%Nov 5 3:59 PM EST
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To: Kirk © who wrote (10748)11/7/2002 1:21:11 PM
From: Cary Salsberg   of 10921
 
RE: "My thinking is they will have to take an immediate expense equal to the money to buy the stock in the open market to fill the grant price."

If the open market price is equal to the grant price, there is no expense at the time of purchase. At the time of sale, the expense will be loss of income (opportunity income based on the average interest rate earned on cash and equivalents) during the holding period. If the purchase price were less than the exercise price, loss of income is decreased by the profit on the sale.

It is possible that accrued "loss of income" expense and accrued "adjustment to market value" income/expense may be recorded quarterly along with "exercise loss". For a rising stock price (my expectation for the stocks you mentioned), a company will be wise to keep a "reserve for future options". "Loss of income" expense will be accrued for these shares upon purchase and continue quarterly, but there will always be a "net exercise gain".
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