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To: EnricoPalazzo who wrote (52105)	7/15/2002 2:19:16 PM
From: slacker711	Read Replies (1) \| Respond to of 54805

To think about it in another way, 99% of people who quit SEBL will leave some (unvested or out of the money) options on the table. According to a writer on RealMoney.com over the weekend, one interesting discrepancy in SFAS 123 is that you cant go back and book a one-time gain for options that end up unvested. I wonder how long I am going to have to wait for Buffett to start fighting to have that reversed. Probably a long time.... JMO....but none of this matters. The long-term value of a company is determined by it's cash flow (per share). To the extent that GAAP earnings can capture this, it is useful....if not, well I'll take a company with negative GAAP earnings but continued positive cash flow over the opposite. Slacker

To: EnricoPalazzo who wrote (52105)	7/15/2002 5:40:14 PM
From: hueyone	Read Replies (1) \| Respond to of 54805

Perhaps the Black Scholes model has a fudge factor built into it that estimates a percentage of options will go unvested, but I really don't know. I suspect Ron, the fellow that has the employee stock option thread, understands the math pretty well behind Black Scholes. Ron appears to go through an actual calculation in the following post on his thread. I haven't tried duplicating it myself yet. Message 17640344 Anyway, I recently suggested the following simplistic method to expensing stock options with the purpose of reconciling Black Scholes estimates to actual stock options compensation expense as defined by difference of market and strike at time of exercise, or reconciling to actual if the options expire worthless. (I think JS may have been kicking this idea around earlier.) I am not an accountant and I am just tyring to look at some of these issues from a common sense perspective. Message 17730783 Best, Huey