InterDigital Inc (IDCC)

[Dishfan]

The actual cost of the proposed new options:

Ronny and others have provided numbers that exagerate the effects of prop 2, here are the facts:

The new options will cost nothing (zero dilution) unless the value of the company increases. So, we must assume a higher market capitalization to determine the cost (dilution).

Let's assume InterDig grows to a market cap of $3b OK? (The higher the number, the greater the dilution.)

At a $3b market cap the PPS is $50 assuming 60m shares outstanding.

If 5m options are exercised there would be 65m shares outstanding and the PPS would be $46.14.

The 5m exercised options would have cost us $3.86 per share.

However, the optionees would have paid cash for their options equal to the strike price. If the average strike price was $35 per share, there would have been $175,000,000 added to InterDig's capital (and, presumably, to its market cap). So the cost to us is reduced by $2.91 ($175m/60m). Also, InterDig gets a tax break for the options - I don't know what that's worth.

Bottom line - the CPA's are in a tizzy over a net cost of less than $1.00 per share.

Don't be fooled - as long as the law allows, options are good for your InterDigital investment.