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.

Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Raymond Duray who wrote (19226)	5/21/2002 6:08:49 PM
From: Don Lloyd	Read Replies (2) \| Respond to of 74559

Raymond, This is just S&P feathering its own nest, best categorized as 'pandering to economic illiterates'. In the end, option grants are just a category of stock grants, which can be completely and exactly accounted for by increasing the diluted share count. There is little reason to not completely add 100% of outstanding options to the diluted share count. This is not a real issue since every stockholder would want the stock price to increase to such a degree as to make every option exercisable, and if it doesn't so rise, the worthless expiration is a partial compensation for the existing shareholders. If the increase in share count seems too large, then it probably is, and the management has only to moderate its demands. There is simply not a shred of logic that supports double counting salary expenses as both dilution and phantom cash expenses that do not exist. Option grants are certainly expenses, but that expense should appear where it belongs, as an expense to the shareholders in diluted ownership. Option grants result in real positive cash flows, from reduced cash salary expenses, tax deductions and employee exercise proceeds. Any management that does not utilize option grants in a prudent manner where advantages exist, is not fulfilling its fiduciary responsibilities to its shareholders. The real problem is the use of shareholder funds to repurchase stock at high prices to help disguise the real rate of dilution. The illogic that purports to support option expensing would also support requiring a sole inventor/owner to show an expense of half the market value of his company if he gives half of his company to a manager/partner. Regards, Don