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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: BWAC who wrote (64030)	5/14/2003 10:19:44 PM
From: RetiredNow	Read Replies (3) \| Respond to of 77400

OK, to use your example then. What's the cost to the company if the stock shoots to $16 and all those employees exercise their options? Well, very simple. The company pays $2B and gets back $2.4B. A profit of $400M. Great, right? Wrong, they lost out on the opportunity to sell slices of the company for an additional $800M, which the employees pocketed if they sold their shares immediately. So compensation cost is $800M. Why must we record that cost? Because, issuing 200 million shares created dilution, which sapped a net $800 million in value from shareholders and redistributed it to employees. Anything that results in company net worth being taken away from shareholders to go somewhere else is something that must be recorded on the financial statements so that shareholders know where their money is being spent. End of story.