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.

Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs -- Ignore unavailable to you. Want to Upgrade?

To: hueyone who wrote (159)	8/2/2002 10:50:01 AM
From: rkral	Read Replies (1) \| Respond to of 786

Huey, I agree that John Shannon's comparison is valid. Of course, there could still be a real donnybrook while determining the actual cost. Hmmm .. that might be a useful exercise actually. Ron

To: hueyone who wrote (159)	8/2/2002 11:42:20 AM
From: G_Barr	Read Replies (1) \| Respond to of 786

Personally I like the argument that John Shannon began making over two years ago---that a company making a secondary stock offering, and then using the cash proceeds from the offering to compensate employees and thereby generate an expense, is the economic equivalent of issuing stock options to employees who later turn that money into cash by reselling those same shares to the public. The only difference between the two examples is that in number two we insert an extra person in the middle of the transactions. I would think the analogy would be a company promising an employee that it will hold a secondary in 3 or 4 years (average vesting date) and distribute the cash to them only if (i) they are still employed at that time and only if (ii) the stock price is higher than it is today. This promise would probably be deemed an SAR which has always been required to be expensed (though why it should be treated differently than options never made sense to me). The question with such a promise, as with options, would seem to really be should one try to estimate an up front expense that may never happen or recognize it at the back end when it actually is incurred as the promise could result in (i) no expense to the company, (ii) a moderate expense to the company or (iii) a huge expense to the company.