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Technology Stocks : Zitel-ZITL What's Happening -- Ignore unavailable to you. Want to Upgrade?

To: dan grone who wrote (13097)	11/26/1997 12:38:00 PM
From: Don Kelly	Respond to of 18263

>>I am not a fan of this company...<< Neither am I, and if he had in-the-money options that were about to expire as claimed in the press release, wouldn't it be stupid of him not to exercise them?

To: dan grone who wrote (13097)	11/26/1997 12:45:00 PM
From: Stanley L Brown	Respond to of 18263

DG, "I am not a fan of this company but I do find it ironic that those who are short Zitel attack Jack King for joining them in selling shares." I personally am not attacking Jack for his sale, matter of fact its the first smart thing hes done in over a year and a half :) P.S. By the way I am a fan :) Happy Trading Stan

To: dan grone who wrote (13097)	11/26/1997 12:52:00 PM
From: CalculatedRisk	Read Replies (2) \| Respond to of 18263

Dan, I applaud Jack King's decision to sell! IMO, selling is the correct decision. Lets review the transaction. According to the following SEC filing: sec.gov On 9/30/96, Mr. King had 601,924 shares of exercisable options. This had a value (on 9/30/96) of $5.122M based on the then fair market of $9.875 less the exercise price of the option. (This is directly from the SEC filing). This means Mr. King's average exercise price is $1.36. Since these options are "expiring" they most likely have exercise prices below the average - but lets use the average for calculation purposes. 1) Mr. King exercised 100K options at $1.36. Fair market value is $12.45 (according to the 144 filing). Since these are non-qualified options (thanks to Mr. Suzman for reminding me!), Mr. King has a taxable event of $1.11M. ($12.45 - $1.36) * 100K shares. 2) Mr. King's maximum tax liability is 40% (28% FED, 11% CA State). This is $0.44M in taxes. 3) Mr. King sold 60K options at $12.45 or $747K Cash to Mr. King. 4) Mr. King paid $136K for the shares. $747K less $136K = $611K to Mr. King. 5) If we subtract taxes of $444K from cash received $611K - Mr. King received $167K after taxes. 6) Of course, Mr. King may use a "full service" broker (transaction costs) and this will reduce the cash in his wallet. My $200K calculation used slightly different assumptions - but it is evident that Mr. King put serious after tax money in his pocket AND raised his tax basis on the remaining 40K shares to $12.45! BTW, reread the press release. This is typical Kingese. The PR implies that King just covered his costs and taxes - but if you read the text carefully - his selling was "driven by the need to cover costs and the resulting tax liability" - and, oh well, put a little cash in King's pocket too<G>. Regards, Bill