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

To: rkral who wrote (78)	6/19/2002 3:21:51 AM
From: Stock Farmer	Respond to of 786

Ron, this is infuriating. I assert that a stock option has value, and ask whether the source of it arises from factor (A) or factor (B). You assert "Both". I then assert you can not prove it. Here is your "proof" I disagree. As evidence to the existence of the 'value of the conditional promise itself', I have cited: .. the FASB attempt to get the the option grant value (cost, expense) into GAAP financial statements, .. the FASB success in at least getting the option grant value into the footnotes of financial statements, and .. the fact that calls on the CBOE have a non-zero positive price. All you did is demonstrate that other people think that the option has value. Duuh. Hardly "proof" that the source of this value is (a) or (b) or both!!! Just that whatever source it is gives rise to some value. Then when I show that the source of the value is not (a)+(b) but just (b) you get all huffy as though I have underestimated your intelligence. Heck Ron, you are the one who claimed it was both. Not me. An option's only worth what it gets exercised for. We don't know what this will be when it's granted, but we have a good idea of what to expect. And then as time marches on we get an opportunity to figure out whether our expectations were close or far from the mark. It's not like by expecting something we force that to come true. If the expected value of an option on grant is $1.00, but shareholders end up coughing up $100.00 in dilution later when the option is actually exercised, what cost did they bear? $1.00 or $100.00? The IRS allows the company to claim $100. I happen to believe the IRS because I am thinking like an owner. Not rigidly following some accounting proscription. I'm just merely figuring out how much real profit I am parting with and calling that "cost". You appear to believe that the answer should be $1.00 More power to you. Someone has to remain suckered by the option scam.