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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Joe Smith who wrote (96570)	7/20/2002 8:42:52 PM
From: mishedlo	Read Replies (3) \| Respond to of 99280

They just increase the number of outstanding shares which does effect earnings. It affects earnings but is not "an expense" and does not get reported except as a footnote. bullshit! Instead DELL or whoever reports bloated earnings, everyone goes ga ga but shareholder equity drops like a rock cause all the profit for years has gone to options. In effect there was no earnings cause it was all given away. This is total bullshit. Unless an until they are expensed, people with think companies have earnings when they do not. No wonder the CEOs dont want to expense them. Enough is enough. Earnings should be as reported to the IRS. Those earnings include the affect of stock options. Pro forma earnings should be FORCED out as well. If a company wants to show pro forma earnings it should do so on a 5 day delay basis. Or explain it in a CC or whatever. Corporate selling should have to be reported 10 days before it is done. How can we bottom when there is all this mistrust. How can we bottom when people have no idea what earnings are? M

To: Joe Smith who wrote (96570)	7/20/2002 10:05:47 PM
From: Boca_PETE	Respond to of 99280

Joe Smith - RE: ("stock options ..current GAAP accounts for them through dilution") Current GAAP only reflects potential future dilution from outstanding "in-the-money" options in the reported "Diluted Earnings Per Share" figure on the face of the income statement. Details of the earnings per share calculation are required in financial statement footnotes. However current GAAP does not reflect past dilution from shares issued as a result of exercised options. Such newly issued shares are buried in outstanding common shares. WHAT IS NEEDED IS as new rule that reflects TOTAL OPTION DILUTION (to Earning PerShare, Dividends Per Share, and Book Value Per Share) as the difference between these items calculated WITH and WITHOUT all shares (exercised and potentially exercisable shares) related to stock option plans. The "Stock Option Grant Expense" now optional under current rules but required to be disclosed as a pro forma impact in financial statement footnotes is totally flawed. It is not applicable non-tradable options - the Black Scholes value calculation is applicable in determining values of traded options. Also, no credits are provided when employees forfeit their options (ie. at termination of employment). And as you so aptly pointed out, no company cash flows fund the profits employees make on their stock options upon resale of the shares they bought from the company (That alone proves it is not an expense of the company). Instead, other shareholders fund those profits directly in a shareholder-to-shareholder transaction. These are the realities of stock options. It's why 98% of companies elected to NOT BOOK stock option expense and fought the issue tooth and nail. To sum up, booking and reporting "STOCK OPTION GRANT EXPENSE" MAKES ABSOLUTELY NO SENSE! P