Aaah... so close... two points for trying.
A quick guess was 809-767 or 52 million options. But then I thought, it can't be that easy, so I spent time on Sunday afternoon (g- actually I appreciate your efforts to get to specifics on Q John) to go to Q's 10k for 2001, and guess how many options they had? ans. around 52 million shares as of 2001 Directors plan. See below for 50.5 million accounted for as of 2001.
But wrong answer. Bzzzzzzt<ggg>
In fact, according to Qualcomm's 10-K filing there were 108,175 million options issued and outstanding. Not 52 Million or 50.5 Million or 57 million as you reference. Of which about half are exerciseable and in the money and the other half are not.
Where did you go wrong? Well, these are legal documents and must be parsed carefully. EVERY word means something.
First, note the wording from the Director's plan: "...At that date, 50,541,570 shares were available for future grants under... ". This is a reference to 50,541,570 shares that are authorized but that haven't yet been issued
Second, note the wording from the 10-K footnote: "September 30, 2001, options for 57,787,000 shares were exercisable at prices ranging from $1.09 to $172.38". Apparently you did not read a few paragraphs further to discover the 2,678,000 exercisable options from the Non-Employee Directors plan for a total of 60,748,000 shares that were exercisable.
But what about the other 47,427,000 options that were issued but are not yet exercisable by virtue of not having vested yet? Which adds up to 108,175,000 options hanging around out there. Of which some 82 million have been issued at strike prices below $19.25... and so on
Most companies when they describe "dilution" do not count the shares that weren't vested yet but will be vested in the future as the clock ticks forward. This will (hopefully) contribute to further dilution during the time frame that you hope EPS climbs from $0.48 by whatever percent necessary so that the sum over some number of years adds up to something close to $32.
A VC or an investment bank will always use the term "Fully Diluted", which calculation includes all of the AUTHORIZED options, whether issued or not, vested or not, in the money or not. For good reason... they all tend to be given out.
When a firm uses the term "diluted" it is important to read in the footnotes which set of options they include and exclude from this figure.
Anyway, all you need to do is go a few pages further into the 10-K from where you extracted your quote. That's what happens if we only read part of a document and not the whole thing <g>
Anyway, if you don't believe me, open the 10-K. Search on 108,175 and you will find several tables.
You can then slice and dice the effective economic impact at a given stock price. Really it's quite astounding when you do this level of homework what you can discover.
Here's the table showing distribution of outstanding options, by whether or not they are exercisable (vested) and strike price. Note the sums at the bottom. Not only do we have to look in the 10-K, but we also have to look in the right place.
You might recognize my 82 Million number as the sum of all options at strikes less than or equal to $19.25 If you work out the sums you will see where I got my "less than $6" figure for weighted average strike price. The rest follows.
This is a very important table to follow. That and the one before it in the 10-K which outlines the history of option grants. This table lets you approxiate the cost <ahem, benefit to employees> from stock options depending on the average stock price at time of exercise.
Options Outstanding
Weighted Options Exercisable
Average
Remaining Weighted Weighted
Contractual Average Average
Range of Number Life Exercise Number Exercise
Exercise Prices of Shares (In Years) Price of Shares Price
$0.02 to
$3.39 9,978 3.15 $ 2.92 8,893 $ 2.94
$3.43 to 33,190 4.56 5.03 28,220 4.95
$6.21
$6.25 to
$8.01 31,767 6.45 7.10 15,399 7.09
$8.02 to 7,753 7.08 13.94 3,196 14.04
$19.25
$23.83
to $66.33 9,794 8.89 54.13 1,524 45.82
$66.35 8,649 8.73 75.27 2,044 77.67
to $83.50
$86.00
to $172.38 7,044 8.89 98.02 1,472 102.82
108,175 6.17 22.20 60,748 11.52
John
P.S. There's still my outstanding question: A company makes $0.48 annual EPS and you would pay $32 for a slice of that. In the absence of stock options. For example. Now, what would you pay for this same company if the dilution rate is 3% per year due to stock options?
Try to answer this without addressing the difference between stock price and grant price.
Have fun. |
