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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Joe Smith who wrote (98482)8/16/2002 9:43:25 AM
From: Casaubon  Respond to of 99280
 
Instead of granting options to the employee, imagine the company granted stock. Clearly, this must be accounted for as a cost of labor, on the books. In a way, options represent a fractional share grant program (on a one for one basis, I would rather have 1 share of stock rather than one option. The option is worth less because of the exercise price and limited timeframe of the option grant). The only thing left to do is fairly value the option grant as a cost of labor. This can be done in similar ways to valuing LEAPS and other over the counter options via Black-Scholes like calculations.



To: Joe Smith who wrote (98482)8/21/2002 4:17:19 PM
From: Pink Minion  Read Replies (1) | Respond to of 99280
 
Why should options be expensed? ... No cash flows out of the company when an option is exercised.

How is it any different than if the company did a public offering (and paid the 10% fee to Goldman) and gave the cash to the employees? Cash flows in and out the same day.

Sounds like a cheap way of selling shares to the public to me.


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