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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (16453)	8/9/2002 6:48:49 PM
From: Skeeter Bug	Read Replies (2) \| Respond to of 42834

When a company buys back stock at the market it is not suffering an economic loss or expense, but exchanging value for value. never said it didn't. The shareholders see a neutral present effect with the cash loss being exactly offset by the anti-dilutive effects of buying back the shares. never said they didn't. It is no more a cost than if it bought a dollar with ten dimes. What there is, is a change in the future exposure to stock price risk vs cash risk. understood. what you disregard is that the cost would not be necessary IF the options were not given. therefore, no stock repurchase w/b required to HAVE THE EXACT SAME AMOUNT OF OUTSTANDING SHARES. the billions used to offset the options dillution could be used to build the business instead of offsetting options dilution opportunity costs are very real. options REQUIRE a company to buy back shares to keep dilution at bay. that money can't be used to build the business. that is the cost. real money, too. no question. in the case of ibm, they would not have to spend billions to offset their options grants... if they didn't have options grants. that is the cost of their options grants. the cost is in terms of dilution OR the cost to offset the dilution if dilution is not acceptable. ibm spends billions to offset their options dilution. real money. think forest, not trees.