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.

Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Windsock who wrote (173461)	3/11/2003 9:20:37 PM
From: tcmay	Respond to of 186894

"This statement from the academic world is absolutely false. An employee can sell their stock option in any market. The option may or not have value depending on many conditions. "For anyone doubting this, what is the "market price" an Intel employee can obtain for an option to buy 100 shares of Intel granted in 2002, having a strike price of $28 and vesting in May 2007? Does the value change if the Intel employee has career plans to leave Intel in 2 or 3 years?" While an employee stock option is not the same thing as an open market option, even discounting the time periods involved (much longer than even a LEAP, of course), it is not true that they cannot be valued. One approach to value any employee's option is to see what it takes to have him walk away from his "golden handcuffs." This happens all the time. This may not have a "market price" in the sense of being reported in the pages of the Journal, but there are ways to estimate the value of such options, especially at the time of granting. As someone here put it, the non-tradability of an employee stock option does not mean it has no value. If Alice offers to sell an option to buy her house for a fixed price to a specific person, Bob, even if Bob cannot trade that option it still has some value. The value of the option is what Bob pays for that option, or the point at which he walks away from that option in favor of some other deal. Now imagine that Alice is in fact a company, or has made arrangements through a company to write an option on her property. (For example, the company might have paid Alice $50,000 to purchase an option on her house to then distribute to some worthy employee.) If a company granted Bob that option to buy that house for a fixed price in N years, the company is giving Bob an item of value, whether he can freely trade it or not. The business world is filled with options which are not transferrable except under various restrictions and yet which are items of value when purchased or sold, and which are taxable when given as gifts to others. --Tim May