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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs
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To: Stock Farmer who wrote (717)12/14/2004 11:08:01 PM
From: Don LloydRead Replies (2) of 786
 
John,

If a company issues and sells shares on the market and gives the cash proceeds to the employee, the cash IS an expense.

If a company issues shares to the employee and buys them back from the employee, the cash expended IS an expense.

If a company issues shares to the employee and only buys them back from a third party that bought them from the employee, the result is the same, and the cash expended SHOULD be an expense, but it is the voluntary cash expenditure that is the expense action, not the grant of stock.

In all three cases above the cash must come out of company cash flow, and IS therefore a part of the business of the company, not just a re-shuffling of company ownership.

Regards, Don
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