Who benefits? Good question.
Well, either getting the accounting price right matters to SOMEBODY, or it doesn't. We know according to Cisco that setting the accounting price too high is a VERY BAD THING to somebody, otherwise Chambers and the entire Tech Lobby are wasting everybody's time by blabberering on about how shifting the accounting cost of stock options upwards from zero is bad. Presumably the farther from zero the more bad it gets. And conversely, the closer to zero the less bad it gets.
So whoever it is on whose behalf Cisco is lobbying, well according to the very credible Mr. Chambers, these somebodies certainly benefit from under-accounting for the darn things.
Now, enter Cisco with their nifty new way of making a pseudo-market in pseudo-options and using the price as a proxy for the market value of employee stock options.
On one side of the table are the somebodies who are affected by the ACCOUNTING value of the options. They benefit from under-pricing the options that Cisco sells to the select few financial institutions.
On another side of the table (perhaps it is the same side, but until we know their names we should allow that it might not be), are a possibly different set of somebodies, who presumably care that Cisco extracts the absolute highest possible price for its securities when it issues them.
It doesn't take too many neurons firing to realize that these somebodies may be entirely different. Or even if they are the same somebodies (unlikely, but let's allow it for argument's sake), then they may lose from one and gain more from the other.
For example, I'm sure everyone on the thread would recognize the feel of wool slipping down their face if the company was to issue one pseudo-option to Merril Lynch, for $1.00, and then turn around and value 180 million employee options at $1.00 each... Ron was spot on in his observation.
Also, let's take the premise that there are a set of somebodies who care that Cisco extracts top dollar for the securities it issues.
If indeed they did exist, then we should expect to hear the howls of indignation over the prices paid for some of the acquisitions. But yet we haven't heard a peep.
So I have a hard time believing that getting the accounting value of a few million employee stock options wrong by $1 to the low side is, in all cases, going to be equally offset by the impact of getting the pseudo-market value of some unspecified number of pseudo-options wrong by $1 to the low side.
Actually, I think it's the other way around.
Furthermore, we can conclusively identify participants who benefit from getting the accounting value of stock options wrong to the low side (insiders and participating financial institutions). And these are the same individuals who will be setting the price of the pseudo-options.
Connecting the dots isn't a difficult thing to do. |
