InterDigital Inc (IDCC)

[blueskywaves]

You misunderstand.

Again, FASB is in the process of expensing options early next year. I don't think you disagree with me that is a good thing because it will definitely change corporate behavior regarding compensation. That accounting rule change, however, will not happen overnight. In fact, the strenght of the opposition by the tech lobby suggest that this accounting rule will be phased in over time instead of happening right away.

Well, guess what will most likely happen when the option accounting rule change goes into effect? Gamesmanship. Companies will try to jam all their option grants BEFORE the rule change deadline. As sure as night follows day, many tech companies will be trying to improve their balance sheets before the deadline. Remember that before the new accounting rule goes into effect, the option grants STILL won't be considered as an expense item.

Again, the exercise of stock options results in a cash infusion, a tax deduction and stock dilution. Why would you want IDCC inhibit itself from such an effort when it also has the practical effect of improving its stock as currency for acquisitions?

Try to get a sense of proportion. A float 60-65M is simply not liquid enough to attract most mid-cap funds even if IDCC keeps on hitting its financial milestones so the ownership base of this stock will be limited to some mid-cap funds, many small-cap funds looking to lighten their exposure and many individuals, some of whom tend to fixate needlessly on the smallest details like insider selling and whatnot.

I understand your argument about long-term dilution. I don't think you understand the unique window of opportunity that is opening up for IDCC in the next year or two as a result of the accounting rule change. This is a one-time event so why be rigid about this opportunity?


P.S. Can a small company ever have too much cash? Keep in mind that IDCC's cash will balloon later this year or next year due to its prepayment strategy. They still have cash burn.