Biotech Values

[wallstarb]

Well here's the reason if the CEO has an OPTION to buy 5m shares @ $1 but hasn't exercised them, the shares dont exist - it's just an option agreement on a piece of paper issued by the company. So the company is on the hook for them @ $1 but they havent officially cranked up the printing press and printed the new shares.

Many times the options may VEST over a 5 year period, but on something liek a change in control (buyout) the employees don't have to wait and all of their options become vested, so if you joined today and got a 1m share option package which vests 20% a year over 5 years and tomorow they get bought out - all 1m shares are yours the day the transaction is completed.

It varies from company to company - but normally I will use 5 - 15% "fluff" when guestimating - and when I really want to see you need to go to 10K and also look at filings over a few years - occasionally there will be lots of people/investors which have options/warrants or converts that should be added to the actual number of shares outstanding. It's not an exact science - but you really should be using a number higher then what they report as outstanding in all cases. Some can be very extreme if there are a lot of converts and the company was very generous to management especially if the stock is tech/biotech (they tend to pay a lot of "equity" int he form of options to employees in lieu of cash - especially younger companies)