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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Cary Salsberg who wrote (4283)	7/24/2002 1:38:53 PM
From: Sam Citron	Read Replies (1) \| Respond to of 95536

Assume ABC goes from 10 to 20 in the subsequent 5 years as the option expires. You exercise the option and the company grants you the 10,000 shares at an artificially low price of 10 compared with the 20 they could have received by selling the shares in a secondary offering. The opportunity cost is $100,000. Is it an expense? I don't know, but they have diluted the equity of shareholders by issuing more shares without the funds going to the corporation. The economic analysis is naturally pretty complex. In my mind a critical issue is incentives. Does the option compensated CEO have the ability to artificially hike earnings and stock price in a given period just before he retires? Unfortunately, he often does.