Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (122028)	7/24/2002 9:27:06 AM
From: kech	Read Replies (2) \| Respond to of 152472

no, it is not double counting, because the expense of option grant is compensation the moment it is given If it is a long term option grant, that can't be exercised for 5 to 10 years then it is not an expense at the moment it is given. It is an expense for the next 5-10 years. We depreciate capital expenses over time, option compensation should be expensed over time if it is a long term option grant. In fact, one of the bills under consideration proposes to expense the cost of the grant over the duration of the window in which it is granted.

To: Wyätt Gwyön who wrote (122028)	7/24/2002 9:41:21 AM
From: Elroy	Read Replies (1) \| Respond to of 152472

I think this sentence is where you are mistaken. let's say in Q4 year 1 it earned 25 cents, and it granted options equal to 10% dilution. however, these options do not immediately dilute the EPS, You make it sound like options only add to dilution if they are exercised. I think that is mistaken, but if that is the case then it makes sense to expense option grants. But I think options add to the fully diluted share count from the date they are granted. The amount of dilution is dependent on the share price at the time the share count is calculated. Deep in the money options should count 100% toward dilution, at the money something like 50% and way out of the money close to zero dilution. If anyone knows whether my understanding is correct or not, I would appreciate it. Doesn't an option grant immediately affect fully diluted share count by some degree? Elroy

To: Wyätt Gwyön who wrote (122028)	7/24/2002 9:58:45 AM
From: qveauriche	Respond to of 152472

Mucho- I think expensing is clearly the direction we're heading, but I'm still not sure how it would work,or that its the right thing to do. The immediate expensing of options requires total speculation as to the number that would ultimately be exercised. Indeed, if you are right about the direction of the market over the next 10 years, a lot fewer options will be exercised than in the last ten years. Since the information is included in the SEC filings already, and is thus available to investors to incorporate into their buy/sell decisions, isn't there something to be said for preserving the present system, albeit with an investing public that has now been thoroughly educated as to the need to learn about the company's options, and a consequent adjustment to the significance,standing alone, of reported earnings? Otherwise, it would seem that companies would have to continually restate earnings of prior years depending on the actual number of options exercised.This would lead to greater uncertainty, not less. Stated another way, the present system provides complete and accurate information, but in a way that requires a bit more digging than just listening to the quarterly eps on CNBC. And indeed, investors go way beyond the eps number already in a variety of ways to evaluate the quality of earnings,etc. Especially if the conflicts of interest can be removed there is also no reason why highly intelligent and highly paid Wall Street analysts can't do this homework and disseminate it to even the smallest and least sophisticated retail investor through published reports. The immediate expensing of options, on the other hand, provides a less accurate way, based upon speculation as to future events, simply to satisfy some paternalistic urge that investors need to protected from their overexuberance by reporting to them as incontrovertible reality what is in fact a worst case scenario.