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

To: Kirk © who wrote (64596)	9/15/2003 5:35:24 PM
From: Don Lloyd	Read Replies (3) \| Respond to of 77400

Kirk, If a company issues options each year, earns $10M a year, pays a 5% dividend using those earnings and the stock price goes nowhere for 100 years, then the options it gives would expire worthless. The folks who want to expense options would have to account for the options losing value with time as they approached expiration. Would they then recommend the time decay be added back to company earnings? Would a company that got a tax break from when it issued the expensed option then have to pay the tax cut back if the options started to expire (as the decay in value is added as income)? I can see all sorts of monkey business that can be done to satisfy this farce. How could a company make plans if their P&L was determined by the stock price which is often disconnected from reality? You and Pete make some great points! BTW, as a shareholder, I'd like to see a table showing how dillution occurs as a stock I hold rises in price and more shares are "in the money." It is not a simple linear relationship to double earnings and the stock price doubles for the same P/E since the number of shares outstanding will go up with the price due to options exercise. All good points. It might be worth noting that Pete and I use arguments that are almost entirely independent, as he pursues a path through accounting theory and I pursue a path through fundamental economic theory. Yet we both effectively end up at the same point, i.e. that the value of the granted stock or options to the company is not difficult to calculate at all, because it is PRECISELY ZERO. Regards, Don