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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (71089)	11/29/1999 2:33:00 AM
From: Michael Bakunin	Read Replies (1) \| Respond to of 132070

Didn't we already have this argument? <g> Ah well -- you know where I stand, I know where you stand. I'm still going to run Dell's numbers tomorrow with the B-S value of options grants expensed. On another, related topic, this market is a hoot and a half. Did you read the NYT column about the fellow who bought a few hundred shares of CHNA way-back-when, on a whim? Fun stuff. Futures look flat overnight... -mb

To: Don Lloyd who wrote (71089)	11/29/1999 9:17:00 AM
From: Freedom Fighter	Read Replies (2) \| Respond to of 132070

Don, I agree with your latest "options" discussion. Have you modified your view a little or I am I just understanding it better? I also think that options are very difficult to value. On the other hand I think it's important to understand the dilution of ownership that's involved (like you) and I have less of a problem with someone trying to estimate a "value" and impact on the "e" of eps if that's the way an analyst likes to view it. The more I learn about accounting, the more I realize that almost everything is an estimate. So I am slowly coming around to opinions and methods that focus much more on cash. Wayne

To: Don Lloyd who wrote (71089)	11/29/1999 11:06:00 AM
From: Chuzzlewit	Read Replies (2) \| Respond to of 132070

Good morning Don, I must have not been clear. I am NOT saying that dilution of any type, including options, is NOT a cost to the shareholders. I AM suggesting that the appropriate way to deal with it is in the 's' of 'eps', not to make an imaginary adjustment to the 'e'. Since earnings are imaginary by definition (consisting of imaginary revenues (A/R) plus real revenues (cash receipts) minus imaginary expenses (depreciation and the like) minus real expenses), why not include another imaginary expense? Second, I think your analysis smears the distinction between a corporation and a partnership. As you point out, the issuance of stock options for employee expenses is a cost to shareholders. If we were dealing with a partnership such costs would certainly be considered an expense. Third, have you considered the effect of altering the order of events? Suppose the the company were to issue additional shares at market value (a non-income statement transaction), and used most of the cash raised to pay employees (an income statement event). Net-net, the financial condition of the corporation and individual investors would be exactly the same, but the financial statement treatment is vastly different. Since the purpose of financial statements is to disclose the financial condition of the corporation I offer this as evidence of the inadequacy of SEC and GAAP accounting rules. Finally, a question. It is my understanding that all instruments that may be converted (now, or in the future) into stock are included in diluted shares. That would include convertible securities along with option grants that can only be exercised some time in the future. Am I mistaken? The following quote is from Wiley GAAP 99: DEPS is a pro forma presentation which reflects the dilution of EPS that would have occurred if all contingent issuances of common stock that individually reduce EPS had taken place at the beginning of the period (or the date issued, if later). TTFN, CTC