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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: Skeeter Bug who wrote (5185)5/26/1998 7:33:00 AM
From: Gersh Avery  Read Replies (1) of 42834
 
Good morning Skeeter

With the current rules in place, the only place that you see the effects of stock option actions is in assets and stock price.

For instance, when Intel converted INTCW to INTC there was a loss of several billion dollars yet the company reported profits. During the last month before the conversion the price of the stock went through the roof. I believe that this was the result of Intel purchasing stock off of the market for the purpose of the conversion. Then when the warrants were being converted the stock started to fall. Supply/demmand rules state that when you increase supply the price of something will fall .. there was suddenly an extra 78 million shares of this stock on the marketplace .. the price fell .. then Intel warned, and the stock fell further.

So .. while current accounting rules say these deals do not have any impact on EPS, they do have an effect on stock price and liquid assets.

Now .. do I purchase a EPS or a share?

In the current market people buy shares. Valuation has gone out the window. In the current overinflated market, the rules of supply/demmand have become much more important than valuation. Because of this, questions regarding stock option programs have become much more important.

cheers

Gersh
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