BSW - Emotions vs. milestones
I don't understand your claim that individual investors are driven by emotions rather than financial milestones. Do you mean they get angry or elated, which leads to irrational behavior? I think we may, to a degree, use a different set of tools to evaluate our investment, but the bottom line inquiry is the same - Will this investment make as much, more or less than alternative investments given the risks involved? The factors used are going to be both subjective and objective.
If you are running a mutual fund and see that a company has recurring earnings of $50MM with 50MM shares outstanding ($1/share), and you project next year's earnings at $200MM, but notice that the ISO plan will issue another 50MM shares next year, you can bet that it will effect your evaluation of the company as an investment. Your evaluation would be affected by more than the mere fact that the EPS estimate would have to be adjusted to $2 instead of $4 without the ISO plan (objective), but would also include an evaluation of the management that would line their pockets in this way(subjective).
The IDCC case is not so extreme, but you have top perform the same evaluation. Under certain circumstances an ISO plan can clearly be a useful tool, and it may well enhance shareholder value. At they other end of the spectrum it can be used to loot a company. I don't think that the IDCC plan lies at either pole, but on balance, I see it as a negative to all investors - individual or institutional.
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