Option exercises are accounted for in the Balance Sheet only. They also show up in the Statement of Changes in Equity. The entry is Debit cash and credit common stock at par and additional paid-in capital for any difference. Thus, the effect is compensation without a cooresponding expense in the Statement of Income. Yes, it does create dilution, in that additional shares are issues and outstanding. If the
dilution is material it should have a corresponding decrease in market share price.
Dennis,
Ty very much for your above clear explanation. if you don't mind, I would like to reference it on other threads?
I also have some thoughts for Asnd and would like to share with the thread. Comments are welcome.
1. Based on Asnd' current F/A evaluation; I think the current price reflects closely Asnd's full current value without any buy-out considerations.
2. The merger/consolidation expectation would get "louder" and "hotter" as October draws near...
3. However, what would be the LU/Asnd(or ??/Asnd) take-out price appreciation? Based on last week's NT/Bay merger "talk"; the offeror was quite conservative..
4. Just my humble opinion, I think LU/or ?? would offer Asnd between $55 and $65; if the buy-out does occur. But if not, Asnd may stay below $50 at the end of 1998.
5. Based on the above premises, I would continue to write strike $40 or $45 puts to accumulate a little more shares (or premiums); But would also looking for opportunity to write Jan 99 covered calls, at $50 strike price for $10 plus premium, against the accumulated long shares.
Again, Comments are Welcome!
Best wishes,
Jan |
