This is reasoning that leads to absurdities.
It's not of tangible value unless the share price rises. If there is no tangible expense to the grantor then I just don't see any expense. It's ironic that there can be value to the receiver but no expense to the grantor but that's the way it looks to me.
A stock is purely "air" and goodwill until it pays dividends equal to its value, under this reasoning. If I give away $100,000 of stock, this is an expense.
If, instead of giving you $100,000 cash pay, I give you options which are valued by the market at $100,000, this is the same effect on my finances. Because I could have, instead of giving you the options, sold them at fair market value for $100,000. After I give you the options, you can sell them at market value too. The next effect has the same impact on my finances (modulo commissions and slippage) as if I just sold the options and gave you the money: I have $100,000 less than I would have if I'd given the options to the market, you have $100,000 more by selling them to the market.
To draw any other conclusion other than that this is a $100,000 expense is quite absurd. Because something with the same result as giving cash should be treated the same way as expense. I've given you something with $100,000 fair market value which can be bought and sold for that amount.
Options have market value at any given time. ($20 calls, for instance, have more value if the stock price is 20 than if it is 15, as determined by the market, even though there is a good chance both could eventually be worthless. |
