Thanks, Chuzzlewit, I think we are all trying to learn more about our investment in AOL. The more informed we are -- about both positive and negative -- the better chance we have to make money, which this is all about.
Interesting perspective on stock options. You make excellent points, and I can't disagree with what you said, although I was addressing it from a different point of view. I included the large stock option holders, along with the institutions, as a way of describing the breadth of AOL owners. Whether that is a positive or negative for AOL's long-term appreciation is debatable, and you make some valid points that it might be more of a negative. OTOH, those holding options are not as detrimental as the day traders and momentum players that are responsible for much of the volatility of internet stocks.
As far as the impact of employee stock options, there is a difference, I think, between companies that are clearly growing and those that are using options as a way of offsetting salaries and other costs. A small company living day to day can offer stock options and thereby have the investor provide the incentive for hiring good people, and that is very risky to the investor. Such employees are likely to sell at their first opportunity, particularly if there is near term appreciation. However, a solid company that is growing, and that pays competitive salaries and so forth, is not in that same grouping. I'm sure that many employees will cash in options, and options can be repriced, etc, as you said. If you look at AOL's insider trading you will see there are many employees cashing in all the time. Case himself cashes in significant positions every year, for whatever personal reasons he may have. I can't blame any employee who takes profits, but I would be surprised if they cashed in all of their options, given the company's growth. Furthermore, having options gives employees an incentive to keep the company growing, although there may be some that have gotten so wealthy that they no longer care. One other thing, given that institutions hold and soak up the float, it can be argued that employee sales are healthy in keeping liquidity in the stock.
Well, I don't know what the answer is, but I did want to make those points because there are several sides to the issue of employee stock options.
But I think the biggest problem AOL faces is how to expand into broadband without breaking the bank and without giving up their independence. Cable and telcos can be pretty aggressive and consuming.
Again, good luck! |
