Beard, No, no, no. You're going astray on your lesson and mixing 401(k)s with standard option plans.
Item 2.a.) is what happens. Options are granted at then market price, shares are subsequently taken out of market, buyback puts buy (upward) pressure on stock, ESP looks better, stock price rises. Then employees exercise options buy selling such shares back into market in part or total, lets just say total for simplicity, and employees make money off a sure bet at exercise time between grant price and market.
Upshot, all other things held constant, employees make money off share price rise, company records no expense, OS shares and EPS are the same after all the dust settles as before the program. 401(k) doesn't come into play. -g- But 5 mil just got sucked out of the equity markets. Neat game isn't it! And all on the company's nickel.
Don't get me going on what happens when things do not go as planned and the company rejiggers down the option price, ala MU.
Now get going on that homework! -g-
Regards, Dan |
