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

To: Mike M2 who wrote (82661)	8/2/2000 9:37:35 PM
From: Don Lloyd	Respond to of 132070

Mike - [I think you lost your marbles -g-...] Easy come, easy go. Without a slingshot, there is no opportunity cost lost anyway. -g- [... Since most companies buy back shares, many with debt,in an effort to prevent dilution there is an opportunity cost in that the money could have been used for productive investment rather than financial engineering. The policy of maximizing shareholder wealth via financial engineering will have consequences in the future . ] There is always a range of prices that justifies buybacks, and another range which SHOULD prohibit them. Regards, Don

To: Mike M2 who wrote (82661)	8/7/2000 8:15:57 AM
From: Don Lloyd	Read Replies (4) \| Respond to of 132070

mike - An Informal Proof that Stock Dilution in General, and Therefore Stock Option Grants Specifically, are Effectively Cost and Expense Free to the Corporation 1. Assume a corporation with 100M shares outstanding. 2. Let the corporation create 100M new shares. 3. Let the corporation instruct its stock transfer agent to distribute the 100M new shares to its existing shareholder list with one new share distributed for each existing share. 4. Issue a press release noting the operation and identifying it as a 2:1 stock split, cost free to both the corporation and its shareholders. 5. Unknown to anyone, a computer virus in the computer of the stock transfer agent has caused the new shares to be registered in the name of the spouses of the shareholders, rather than in the name of the shareholders themselves. 6. This is now, in actuality, no longer a 2:1 stock split, but rather a 50% dilution of the entire shareholder base of the corporation. 7. Despite the error, there is still no cost to the corporation for what is now a dilution rather than a split. 8. The situation would be essentially the same if the virus had selected the new share recipients randomly from a national database of residences, or if had used a list of corporation employees. 9. Any particular program of option grants can be transformed into a direct stock grant program by reducing the exercise price to zero and making it effective immediately. 10. From all of the above, it is claimed that any program of option grants, or any program of stock dilution, is cost free to the corporation exactly in the same way as a stock split is. Regards, Don