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

To: Michael Bakunin who wrote (76458)	2/23/2000 6:38:00 PM
From: Don Lloyd	Respond to of 132070

mb - [[..not true, if issuing said security affects the market for same. Let's say you're Picasso (and not dead). A napkin sketch of yours is worth dinner to any restaurant -- but as you thus pay for more and more dinners, that may change. Perhaps next year, it'll take two sketches for a really good dinner, eh? Or one good sketch.. -g-,]] While we could measure the issuance in proceeds, rather than shares, I prefer to grant some validity to your point. However, what we are trying to establish is that the opportunity cost is NOT the market value of the shares issued. Certainly the loss of market value due to issuance is much closer to zero that the full market value itself. All values are subjective. In the case of the option grants, the subjective value of the shares to the employee (the market value) is much greater than the subjective value of the salary forgone. The company perceives that the value of the salary forgone (plus all the tax benefits and exercise proceeds), from the company POV, is greater than the opportunity cost to the company of the option grant and any subsequent share exercise. Regards, Don