michael t, re options, totally disagree.
If a company came out and admitted, "the company is going to issue $10 million in new securities and all the proceeds will be immediately given to management," the public would never stand for that.
Plus, you're looking only at the balance sheet. The income statement would look far different. It would render the income statement virtually worthless and not allow for worthwhile examination of the value of a company and how capital should be allocated throughout the entire economy. Bad for all of us.
We could just pay everybody in options and turn the whole thing into a stock-selling scheme. Revenues would fall straight to the bottom line on the income statement. No cost of goods sold, no SG&A expenses, nothing -- just pay everybody in options: employees, partners, vendors, everybody.
That sort of a system would not be helpful to anybody in the long run. Options make it way too easy to make an unprofitable company look profitable. If you've got $10m in revenue and $11m in expenses, no problem, just start paying everyone in options and now you're profitable! It's a disguised ponzi scheme.
To paraphrase Buffett, options are compensation, compensation is an expense, and expenses go on the income statement.
AI
