Zitel-ZITL What's Happening Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Zitel-ZITL What's Happening

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: dan grone who wrote (13097)	11/26/1997 12:52:00 PM
From: CalculatedRisk	Read Replies (2) of 18263

Dan, I applaud Jack King's decision to sell! IMO, selling is the correct decision. Lets review the transaction. According to the following SEC filing: sec.gov On 9/30/96, Mr. King had 601,924 shares of exercisable options. This had a value (on 9/30/96) of $5.122M based on the then fair market of $9.875 less the exercise price of the option. (This is directly from the SEC filing). This means Mr. King's average exercise price is $1.36. Since these options are "expiring" they most likely have exercise prices below the average - but lets use the average for calculation purposes. 1) Mr. King exercised 100K options at $1.36. Fair market value is $12.45 (according to the 144 filing). Since these are non-qualified options (thanks to Mr. Suzman for reminding me!), Mr. King has a taxable event of $1.11M. ($12.45 - $1.36) * 100K shares. 2) Mr. King's maximum tax liability is 40% (28% FED, 11% CA State). This is $0.44M in taxes. 3) Mr. King sold 60K options at $12.45 or $747K Cash to Mr. King. 4) Mr. King paid $136K for the shares. $747K less $136K = $611K to Mr. King. 5) If we subtract taxes of $444K from cash received $611K - Mr. King received $167K after taxes. 6) Of course, Mr. King may use a "full service" broker (transaction costs) and this will reduce the cash in his wallet. My $200K calculation used slightly different assumptions - but it is evident that Mr. King put serious after tax money in his pocket AND raised his tax basis on the remaining 40K shares to $12.45! BTW, reread the press release. This is typical Kingese. The PR implies that King just covered his costs and taxes - but if you read the text carefully - his selling was "driven by the need to cover costs and the resulting tax liability" - and, oh well, put a little cash in King's pocket too<G>. Regards, Bill

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next