InterDigital Inc (IDCC)

[Desert dweller]

Revlis I have the facts and unfortunately it will take years for investors to realize that the excessive use of options is no more than legal theft. Think about this simple example.

Let's say you invested in a mutual fund that was charging you 10% in management fees. Would you continue to invest in this company? If so you would be a fool. Now compare that to what management at IDCC and many other companies are doing with your investments. By issuing options on stock it is effectively putting a lid on the stock price. If they issue 10% options year in and year out the long term effect on your return is the same as a mutual fund company charging you a 10% management fee.

Investors have not woken up to the impact that options have on their returns. A reasonable amount would not be a bad thing. The problem is we have gone way beyond what is reasonable and most have not grasped this yet but they will. Unfortunately for all investors it will be years of sub par returns or even negative returns that will make them finally wake up to this fact.

If a company is doing a good job at growing its business, a 15% growth in revenues and overall net income would look like a good thing. But if this same company is issuing options equal to 10% of shares the stock performance will surely suffer because instead of EPS growing at the same 15% it is only growing at 5% due to the dilution of the shares. It is very simple math but the concept of a free lunch is something most want to continue to believe.

Remember if it sounds to good to be true it usually is and that my friend is the case with excessive options.