Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: The Phoenix who wrote (47691)	2/1/2001 10:13:42 AM
From: GVTucker	Read Replies (1) \| Respond to of 77400

From the Economist article: "So if options are a real expense, where does the money come from? The answer is: directly from the balance sheet, in one of two ways, both of which do tangible harm to shareholders. When employees exercise their share options, the company concerned can do one of two things. The first is to buy its own shares in the market. However, if it does, shareholders lose out: the cost to the company of buying its shares in the market is higher, sometimes much higher, than the price at which they must sell them to employees. There is “a wealth transfer from shareholders to employees, which will be especially large following periods of unusual stockmarket gains,” write the two Federal Reserve economists. Second, if companies do not buy their shares back, there is only one alternative: to issue more shares. This “dilutes” the holdings of existing shareholders; they end up owning a smaller proportion of a bigger pie. Moreover, if the number of shares rises, then to achieve the same earnings per share, companies must increase their profits more.