SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Politics : Ask Michael Burke
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Knighty Tin who wrote (55480)4/12/1999 10:01:00 AM
From: Freedom Fighter  Read Replies (1) of 132070
 
Mike,

>>The best part of the issue is when Smithers
claims that the phony accounting for employee stock options inflated eps by 56% in
1997 and 50% in 1998. I must have lost my new pair of dimes. That sounds like a lot to
me. <g> Nothing new to readers of this thread, but still nice to see in print given the
circulation of the rag.<<

The way he calculates the cost of the stock options is to see what the ultimate cost of repurchase is based on the market price of the stock. In other words, when MSFT grants a pile of options they use Black Scholes to estimate their value. The adjusted EPS is in the footnotes. If MSFT stock doubles in about 5 minutes (which it usually does <g>) the cost of repurchasing the exercised shares down the line far outstrips the originally estimated value of the options. It is that repurchase cost (adjusted for time I think) that gets him to the numbers he is quoting.

He also estimates the cost of immunization. That is, if the company bought calls to protect itself from a runaway bull market and the costs associated with repurchases.

I am not sure I agree with his methodology completely because a bear market would reverse these costs to some degree, but the numbers are staggering no matter.

Wayne
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News