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To: Tushar Patel who wrote (174359)	5/4/2003 3:49:31 PM
From: TimF	Respond to of 186894

They deal with the idea that stock options are not a cost but what about the idea that stock options are a cost directly to the current stockholders rather then the company? And they may not be adequately disclosed it doesn't mean they are not accounted for. The dilute the shares. If you count them as an expense they would dilute the shares and reduce earnings, while the same value of cash would only reduce earnings, which would mean that the options would then show a greater impact on EPS then the same value given in cash. Tim

To: Tushar Patel who wrote (174359)	5/5/2003 5:35:16 PM
From: Lizzie Tudor	Read Replies (1) \| Respond to of 186894

re: Fallacy 4 - Expensing options will hurt young businesses Interesting... so HBS came up with an approach that works for the IPO case, is that what this is implying? Nobody else seems to have a working model for new IPOs, other than ignoring the billions of "expenses" which inevitably wind up on the books due to options expensing at IPO. Not to mention the valuation exercise which we know is not trivial since CBOE doesn't offer options on new issues. I really think this has to be dealt with, nobody is going to take a cash flow positive company public with billions of expenses on the books, you can't get a decent valuation unless something really changes in the valuation metrics, and if valuation models are created that exclude options, well then that makes them questionable as a real expense. We have a company right now which is likely IPO in a year or so to use as an example, Google. If options expensing makes Google look like a bad company, or a bad investment at launch, then we need a better model for options vs. what is being proposed I'd say. After all Google is the hottest startup we've had in years, if this company can't IPO with a decent valuation, who can? Lizzie