Bob Brinker: Market Savant & Radio Host Message Board

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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host

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To: Boca_PETE who wrote (5176)	5/25/1998 10:42:00 AM
From: Skeeter Bug	Read Replies (2) of 42834

pete, the shareholder is the company. the reason they fought it is pure and simple. economics. more expenses equal less earnings equals lower stock price. if i cut earnings by 50% or increase the amount of shares by a factor of 2, what is the difference for each shareholder? the end result is the same. except, the actual cost of those dilluted shares is hidden until the options are exercised so a company can, in effect, hide this cost of doing business and command a higher stock price than otherwise would exist at any given point in time. >>Moreover, average shares used for computing Diluted Earnings per Share include additional shares from the assumed exercise of all "in-the-money" outstanding stock options.<< if this is true in all cases then i guess it mitigates what i outlined above. so, are you saying that a msft includes all issued options in their dilluted shares outstanding, exercised or not? i'd find this hard to believe as the barons article is kind of bunk then b/c the effect of the options is already included in reduced eps due to a larger s. good luck...

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