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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs -- Ignore unavailable to you. Want to Upgrade?

To: rkral who wrote (16)	6/12/2002 3:30:26 PM
From: rkral	Respond to of 786

Change "mr market" to "shareholder(s)" .. Recommend the above change for the "value flow" diagram. This will provide a tie-in to J. Shannon's theory. Note that this change in terms DOES NOT mean I believe that "existing shareholders" are, on the exercise date, providing the "compensation" funds to employees exercising their options. The diagram actually is for the "exercise and sell" case. I'm ignoring the "exercise and hold" case, which should be easier to analyze .. if anyone becomes interested later. Ron

To: rkral who wrote (16)	6/12/2002 11:59:57 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 786

Good diagram Ron. 4) the net for mr market is what it is. ... which is? Here's a hint. Before the exercise, Mr Market owns all of the shares of the company. A pile of things worth $X. And presumably some cash. He ends up with all of the shares of the company. Still a pile of things worth $X (assuming share printing costs of zero) plus $10 cash (and a $20 tax credit). And Mr Market also has $70 less in cash. Maybe you can do the math for yourself at this point and figure out what it is that it is that Mr. Market owns pre-tax and post tax. And maybe relate the pre-tax numbers to what it is that the employee gets pre-tax. And see if there's some sort of coincidental relationship. And then we can have a rational discussion. John