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To: LLCF who wrote (30616)	10/24/2000 10:04:23 AM
From: Perspective	Read Replies (2) \| Respond to of 436258

<I still don't see why not... if you dilute by 10% to buy some company, your earnings have to be 10% higher to keep the same EPS. If not, EPS starts to plummet because of all those shares floating around. This recipe has caused many a hot stock to get absolutely CREAMED... "growth through aquisition" has not had a great record in many cases.> Like I said before, if I have 10M shares outstanding, and I issue 1M more, raising $50M, I could simply set fire to the money. Is the dilution of the remaining income sufficient penalty for my stupid action? Clearly not. Dilution alone is not an adequate accounting of the management error. The income statement should be impacted as well. Income statements are a way of charting changes in shareholder equity over time. Positive income means an individual share is gaining ground, and negative means losing ground. However, I agree with Don now. In stock for stock transactions, the correct impact on the individual shareholders depends upon the relative valuations of the companies. If you are the most overvalued company on the planet, it is to your shareholders' advantage to go acquire every asset you possibly can with your funny money. Despite an increasing float, it is actually negative dilution, which if anything would result in the need to post an income stream to the earnings statement. Determining whether dilution or accretion is taking place is therefore virtually impossible, since the relative valuations are clearly a matter of opinion. The same is NOT true of options. There is a minimum economic value of an option the day it is issued. It is the cost of a loan to carry the underlying shares. While the options have an inherent put that is virtually impossible to value, this interest expense at a minimum should be expensed. BC