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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs

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To: Stock Farmer who wrote (722)	12/16/2004 8:12:42 PM
From: Don Lloyd	Read Replies (1) of 786

John, DL: The only exception to compensation is a company's own stock, or claims to it,... Why should this be the "only exception"? One financial instrument is as good as another. The issue is that a company cannot own itself, no matter how many of its own shares that it may hold, or how many new ones that it may create and hold. Assume that there is an envelope on the table that contains two $5 bills. Also assume that each of us has a piece of paper that is labelled: One ownership share of the envelope and all of its contents If no other shares exist, we each have a share that is worth $5. If other shares do exist, but all of them are inside the envelope, our single shares are still worth $5 each. It doesn't matter whether we ignore the additional internal shares or if we say that each of us owns half of the internal shares as well and just value the shares appropriately less. In either the case, the internal shares cannot have any economic effect unless and until they are externally distributed in a manner that is NOT proportional to the external shares already in existence. Regards, Don

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