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Technology Stocks : All About Sun Microsystems -- Ignore unavailable to you. Want to Upgrade?

To: Scott Meyer who wrote (51897)	9/26/2002 5:48:50 PM
From: cfimx	Read Replies (1) \| Respond to of 64865

>>So if XYZ is trading at $10 and they grant Joe Hotshot 1000 options (at $10) they must either have 1000 shares of XYZ to cover the option or they must go buy them at the market price. They pay $10,000 to buy the stock and that $10,000 shows up (should show up) as (gasp!) salary expense. what about the $10 they get from JH when he buys the stock from the company?

To: Scott Meyer who wrote (51897)	9/26/2002 6:07:12 PM
From: QwikSand	Read Replies (1) \| Respond to of 64865

Scott: Thank you for that answer, and I hope the thread will forgive this slightly OT follow-up. It seems that you're saying that the company has to have the stock in its possession as treasury stock (or something) from the date of the grant until all the options are either exercised or expired. Is that indeed the case? I wasn't aware that companies had to have capital tied up to back up options from day 1 of a grant (my unawareness isn't an assertion that it's true or false). If the company does need the stock starting on the date of the grant, I can still only see an expense recognized on the grant date as the present value of the interest on the tied-up capital. The employee has to buy the shares from them at that price when and if he exercises, so why would the whole strike price be taken as an expense? (Of course if they have to go to the market at exercise time, there could be a real expense much larger than the strike price, but that's a different question). Thanks. --QS