House debates stock option bill

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... But Options Do

"Money doesn't grow on trees
'"The notion that stock options are an expense is absolutely absurd," said Rep. David Dreier, '

"Major corps like Coke already expense options, are they absurd? "

So maybe there are major cos that expense them, but I don't see how they are an expense at all. Options don't cost the company anything - they only dilute the ownership of the company.

They should without a doubt be reported, but they certainly don't look like expenses to me. Please explain what the cost is.

The way they work is they take a tiny bit of ownership from each of the stockholders, and transfers that ownership to the person granted the options. It costs the shareholder that bit of ownership, so what they own, is really worth a tiny bit less. And if I remember correctly, the grantee pays the company cash to buy the options at the earlier (lower) price. So to the company, its a lot like printing money!

If the options are expensed, it will make it harder to value a company based on its income, because this "expense" is irrelevant to the bottom line.

-Dan

Posted by: Dan__   Posted on: 07/20/04 You are currently: a Guest | Members login | Terms of Use

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