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Technology Stocks : Command Systems, Inc. (CMND)
CMND 0.129+13.6%3:59 PM EST
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To: Jeffrey E. Klein who wrote (507)5/4/1998 9:29:00 AM
From: Scott Pedigo  Read Replies (2) of 1956
 
With regard to employee stock options, the only benefit to having
a lower stock price is if you have to buy shares already allocated
to the employees (but not yet in hand) on the open market. I hardly
think that is the case. Companies usually just issue more shares,
subject to stockholder approval, setting aside a pool for giving
to employees.

In general, the only benefit of having a lower stock price is if
one wishes to buy the stock. So will the company now institute a
stock buy-back? I hardly think so, so soon after the IPO. Probably
after this precipitous drop they'd be accused of manipulation if
they tried.

One other benefit of a low stock price is if an executive's
compensation is tied to increases in the stock price, but this is
valid only if the executive comes on board with the low price,
giving more room for an increase. It doesn't help to lower and
raise it back.

Lower the price now to avoid a disappointment later in terms of
growth, or EPS? Well, EPS looks better if the stock price is
lower for a given revenue, but the whole purpose of getting a
good EPS is to raise the stock price and increase shareholder
value, right?

I don't buy this idea of the company executives taking an action
with the purpose of lowering the stock price. They may have
accepted the danger as a side-effect of an action taken for
some other reason.
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