Expensing Options

The news across the wire today is Intel and eBay's earnings take a hit from options expenses

Who cares?

Cash flow is what matters. Cash flow per share is what I care about. And how fast its growing

Sure options create dilution which means lower cash flow per share but I don't need some fancy black sholes model to tell me how many more shares are coming

That's been in the footnotes for years

I was at a board meeting today where we talked about the earnings impact to our company when we start expensing options this year

Its a waste of time. Give the accountants what they want and move on

The accounting board has made a mockery of the income statement. A gaap statement is useless to me now

I have to back out all these non cash charges. Who does it help?  The little guy who is trying to figure out the stock market?  Hell no, it helps the big guys with the spreadsheet jockeys

It's a joke

Comments

[Dave]

So, options dilute cash flow per share, but what you care about is how quickly cash flow is growing?

How do you reconcile those two observations? Either the granting of options reduces the rate at which a company compiles cash or it does not. Either the granting of options affects your key metric--cash flow per share--or it does not.

If you care so much about how quickly cash per share is growing then it seems to me you should care a lot about the number of options granted.

[Darrell Dvorak]

Excellent post, but the accountants control the SEC, the legislatures,etc, so we have to rely on the private sector (like you) and the occasional biz school (like UChicago) to educate the uninformed investors (who aren't the ones who drive long term stock prices anyway). Dave above is a good example of the confusion.