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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Don Earl who wrote (15127)	8/11/2002 9:33:14 AM
From: sjemmeri	Read Replies (1) \| Respond to of 78768

>Issuing new stock to cover options on a few hundred shares issued to a computer programmer to keep cash expenses down, is a lot different than purchasing a million shares on the open market to issue to Michael Dell below the purchase price. I'm inferring from this statement that you are bothered more by the latter than the former. As I consider the relevance of options to an investment decision, I find myself leaning the other way. My reasoning is if options are used to compensate most or all employees (or buy materials/services needed as suggested by Mr. B.) than on a cash basis the business itself is unsustainable. However, if most or all of the options are going to the CEO and a few of his cohorts, they are (as suggested by Timba's analysis) pocketing all the profits. While that may be offensive, at least the business makes profits available for pocketing. And if an analysis indicates that market capitalization is cheap relative to those profits, the business should be attractive as a takeover by a company that may decide to dump the ceo and his posse, thereby, cutting that 'expense' and gaining the otherwise profitable business. If everyone is paid in options, then likely the enterprise would not be profitable on a cash basis to anyone (lacking a raging bull market with escalating share prices).