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Technology Stocks : MRV Communications (MRVC) opinions? -- Ignore unavailable to you. Want to Upgrade?

To: Dee Jay who wrote (6832)	1/22/1998 2:13:00 AM
From: Dan Ross	Read Replies (1) \| Respond to of 42804

<<Again, we shareholders came out well in either event - the options were going to be exercised if the price hadn't fallen, and we are no worse off now that they've been repriced. It could happen to MRVC some day and I'd hope that mgmt. would do the same thing.>> Is this really the way you feel? Being a beancounter by degree I am well versed with shareholder's rights and dilution....YOU ARE WORSE DUE TO THE REPRICING....The options would not have been exercised prior to the repricing....NOW THEY WILL BE and added shares will be outstanding unless the firm purchases stock in the market to offset this added dilution.....A classic example of this is MSFT...they spent over $1 billion last year to purchase stock to avoid dilution due to stock options....they spent $$ that could have been used to grow the company to avoid dilution.... This is happening in HIGH-TECH in a big way.... You would be correct that if top talent left, you would be worse off....this is a part of business....especially in high-tech where talent is hard to find.....Your assesment is very accurate.....I have numerous friends that increased their salary over 100% last year alone with their EE degrees... However, the repricing of stock has become far too common in today's senior management.... Stock options will be treated as an expense within 3 years if this continues to happen....THE FASB is talking about this issue as I type......COMPANIES WILL RAGE over this....Why will this happen? Stock options were created and used initially to make sure that agency costs were reduced and that senior management's goals/interests matched that of the stockholders....Classic agency conflict.....Make sure that senior management works to maximize shareholder value by tying their wealth to the shareholder..... Options are frequently being given to EVERYONE in companies....One can justify some key engineers, senior management, etc... However, some companies are giving them to EVERYONE including secretaries....THIS IS RIDICULOUS!!!! Perhaps not as it makes sure that everyone in the company is working in the interests of the shareholders..... THIS IS COMPENSATION THOUGH.....THIS IS THE PROBLEM....currently this is not a line item in the income statements of firms....If this continues, it will become one....Many companies, by law, now disclose the effect that the options would have on their EPS...FOR SOME COMPANIES IT IS HUGE!!!! MSFT CFO has said publicly that their biggest LIABILITY is their stock options........THIS IS FACT...... I don't doubt your intellect at all Dee Jay....You have proven yourself to be a VERY smart, and shrewd poster over the past year and a half that I have been on SI...... However, I do fear for YOU and MY FELLOW INVESTORS.....TOO many people don't fully understand this issue fully........Mostly beancounters, CFO's, and conservative investors know the significance of this issue...I would look for it to gain importance over the next year or so... IT WILL BE IN THE PUBLIC LIMELIGHT within the next year or so in a big way.....Valuation are at record highs with possible added dilutions throughout growth stocks....However, remember that everything works in cycles......Growth stocks will lose their growth as added dilution impairs that growth..... Take care Dan Ross