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

To: Elmer Phud who wrote (178367)	6/23/2004 11:51:27 PM
From: brushwud	Respond to of 186894

Such programs typically grant the stock at the 15% discount to the starting price or the ending price, whichever is lower. No options are involved. Technically and legally, an employee participating in an ESPP gets an option to purchase X shares on the first day of the offering period which expires on the last day. If the discount is 15%, the strike price of the option is 15% below the market and that discount is the intrinsic value of the option. Since the option is typically only for six months or so, its non-intrinsic Black-Scholes value is fairly small. The discount is completely independent of the option aspect. If the shares are disposed within a year or so, the discount is already treated as ordinary income (compensation) to the employee and a deductible expense (compensation) to the employer. So the FASB proposal would capture the discount on all of the ESPP shares issued, not only those which are disposed of short-term. And it would add a small Black-Scholes increment to compensation expense due to the option aspect.