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To: SouthFloridaGuy who wrote (63593)	4/17/2003 11:40:25 AM
From: hueyone	Read Replies (1) \| Respond to of 77400

if it's good enough for VC's calculating equity valuatoin in A or B round financing, it's good enough for GAAP. Excellent point!! The tech industry uses Black Scholes internally to estimate the value of option packages, but they don't want investors to use it. They want outside investors to value the options at zero. LOL!! Sebl recently used Black Scholes calculations to come up with an offer to repurchase its employees options with a strike price over $40. The offer price was set at the highest Black Schloles value for options in the pool. The hypocrisy of these companies claiming options have a zero value when reporting to the outside, investing public is really too much. Regards, Huey

To: SouthFloridaGuy who wrote (63593)	4/17/2003 12:17:38 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 77400

LIG, No, it depends on the context. You are looking at it from the company's standpoint, I am looking from the shareholders' standpoint. In the case of stock, the shareholders' standpoint is perfectly represented by the dilution suffered by the issue and distribution of new stock. It is only a technical issue that currently not all option grants are immediately counted as dilution as well. The options DO have value. That's the wrong question. The question is WHAT VALUE to WHOM. Contrary to popular belief, no such thing as a value that is the same to everyone exists. All economic values are subjective. If I trade you good A for good B, it is NOT because you and I agree that A and B are of equal value, but because I subjectively value B greater than anything else that I can trade A for and you subjectively value A greater than anything else that you can trade B for. A company cannot own itself. If it creates new shares (or options) and gives them away the expense that it suffers is the replacement cost of effectively zero. If a company creates new shares and accidently burns them up before it gets a chance to distribute them, do you think that it really suffers an expense? There is no logical way to claim that stock shares given to employees are an expense to the company and that shares given to existing shareholders in a fractional stock split are not an expense. The only difference is who ends up with the shares, and even the stock split shares can be given to the employees by the shareholders directly resulting in two states which are identical for all participants. While nobody is claiming Black Scholes it the end-all, it is certainly a way to start...if it's good enough for VC's calculating equity valuatoin in A or B round financing, it's good enough for GAAP. Since the actual value to the company IS zero, there is no difficulty whatever in calculation. The real expense of stock and option grants is the dilution of ownership share for the existing shareholders, not the company that they own, and there is no need to convert that dilution into dollars. It is argued that companies that pay part of their compensation in stock or options will show different numbers in their financial reports than companies that don't. This is true, but the error would be if different companies didn't accurately report what their real numbers were. It is silly to try to pound unique companies into mandated, standardized round holes at the expense of accuracy. A proper accounting method for a given company shouldn't depend on whether it is one of a million companies or the only company in the world. Accuracy counts, not a forced comparison between apples and oranges. Regards, Don

To: SouthFloridaGuy who wrote (63593)	4/17/2003 6:11:08 PM
From: Lizzie Tudor	Read Replies (1) \| Respond to of 77400

While nobody is claiming Black Scholes it the end-all, it is certainly a way to start....if it's good enough for VC's calculating equity valuatoin in A or B round financing, Are you under the impression that top tier VCs use black scholes as a way to value companies in round A or B? Do you have some documentation or proof that somebody was actually valued using this model? I have never heard of this. I can't even imagine how it would be used in a round B.