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Biotech / Medical : GUMM - Eliminate the Common Cold
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To: Riverlightning who wrote (560)5/9/1999 9:04:00 AM
From: DanZ  Read Replies (2) of 5582
 
Jim,

<What value is there to an option that allows one to buy at market value?>

This is a good question and I'll answer it based on what I believe to be true. I'll call GumTech next week and verify if what I write here is accurate.

GumTech is granting options to buy common stock rather than the common stock itself. The exercise price of the options will be the fair market value of the common stock today (~10). The options expire in five years so they have a lot of time value. If Zicam and the gum business do well, the stock will very likely be significantly higher than 10 in five years and the owners of the options will make out very well. For example, if the stock is at $100 in two years (ggg), the option holders can buy the stock for $10 and will have a paper profit of $90 per share. IF Zicam does $100 million in sales in two years and GumTech wins a couple of large gum supply contracts (nicotine and dental gum), a stock price of $100 per share in two years is well within reason.

Dan
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