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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Elroy who wrote (170381)	7/24/2002 5:52:02 AM
From: Sr K	Read Replies (1) \| Respond to of 176387

Imagine that you own the whole company, and you grant the 10 million options to your managers/employees. Exercise price $1.00, term 10 years. The business improves, and the company (stock) grows to be valued at $7.00 per share. The employees exercise some or all of the options at $7.00, recording (and paying payroll and income taxes on) the gain of $60,000,000 and the company takes a tax deduction of the same $60 million. The options are not free. The company receives the $10 million exercise price(s), there are 110 million shares outstanding, and $60 million value has gone to management and employees. If the options were exercised and sold on a short-term spike in value, and then returns to the $1 per share value, you the owner of the 100 million shares would have allowed $60 million to be transferred for the tax deduction value of the exercise price. Options were to align optionholders interests with shareholders. Allowing exercise and immediate sale doesn't do this. Excessive options gives an incentive to distort earnings to achieve pops in a stock that are not lasting.