As a shareholder I admit that all this news about Steve Jobs and potentially "illegal" dealings makes me uneasy. But as for the price of the stock ($83 something as of this weekend) if it makes any sense to you, please explain it to me.
Apple announces record earnings, but predicts a conservative upcoming quarter, announces the iPhone to general applause and good expectations, Mac sales show strong growth in the face of a PC sales slowdown, the iPod continues to reign supreme among portable music players and the stock price is down from before New Year's???????
More recently Cisco announced 41 percent profit increases year over year and made an acquisition of a software company that almost all analysts agree was a good move and the stock price is down????
Stop me when this starts making sense to you.....
They are just burning up more cash than before, more than 41% more... :P Profit and Income are two different things. This sort of thing happens all the time.
What happens with stock values is probably fairly complex, but It seems as if investors will find a small problem and use that as a reason to jump ship when everything else is going well.
But as an Apple shareholder, you should think twice about not backdating stock options. Stock options have a certain amount of value based on the "strike" price (the price at which you are given the right to buy the stock) and the current market price. If the options get issued at a backdated price, you don't have to receive as many options to get the same value as you would if they were issued at a current, higher price. If the board of directors decides to pay Steve Jobs $20 million in stock based comp, it is better they do that with fewer options than more so other shareholders experience less dilution. The more you get diluted, the less of Apple's earnings you have a claim on, hence, Apple will have a lower earnings per share.
But if they want to just pay him a bonus, they can also do that. The intent of options is to encourage better future performance that helps stock value, not to be a bonus on previous performance. I suppose there may be differences in taxes that would make a backdated option more worthwhile than a bonus, I don't know.
I really don't know if exercising the options will eventually create more shares, that's outside of my knowledge. The amount in question is relatively small, so even with dilution, I don't think it would be noticed.
I am so glad to here that it is legal. Before I read this post I was going to ask the question so thanks people. As for the morality of it, I am not hung up on what is right or wrong on stock options but I don't imagine that people are doing it with the thought that they are ripping people off or being dishonest. Cheers for the heads up.
Glad to know it is legal. As an Apple shareholder I think this practice should stop.
It HAS stopped! None of this continued after 2002, when Sarbanes/Oxley took effect. Before that, when all the backdating was going on, the CEO (of any company) was not responsible for the accounting practices. That changed with Sarbanes/Oxley - now CEOs are required to sign the accounting statements, and can be criminally liable if the statements are wrong. But that was not the case before 2002, when this happened.
As many have said, backdating was not illegal. It's very bad of the writer of this story to say Lasseter's shares were "dishonestly" backdated. It might be dishonest if it was hidden from shareholders and not accounted for properly (which is what the investigation will find out).
Again, everybody - the backdating is not happening now, and hasn't happened for 5 years.
As a shareholder I admit that all this news about Steve Jobs and potentially "illegal" dealings makes me uneasy. But as for the price of the stock ($83 something as of this weekend) if it makes any sense to you, please explain it to me.
Apple announces record earnings, but predicts a conservative upcoming quarter, announces the iPhone to general applause and good expectations, Mac sales show strong growth in the face of a PC sales slowdown, the iPod continues to reign supreme among portable music players and the stock price is down from before New Year's???????
More recently Cisco announced 41 percent profit increases year over year and made an acquisition of a software company that almost all analysts agree was a good move and the stock price is down????
Stop me when this starts making sense to you.....
The problem is, none of us really knows the quantity and quality of information and expectations that are factored into the stock price. We can only make broad inferences, and your guess is as good as mine or Cramer's or Jobs' or an analyst's. Thus, for example, $83 could have factored in positive earnings surprises and the iPhone, and $96 was hype; alternatively, it is $96 that justifies the earnings surpirses and iPhone, and $83 is a "buy."
Only the future will tell!
In the meantime, the options stuff is a drag. But look, Jobs can put it to rest by coming out and addressing it squarely. (But at this point, his lawyers have probably told him to shut up, and that fits his basic predeliction anyway).
saw Lasseter granted one million shares whose initial value was dishonestly backdated to
You are getting pretty close to libel over here.
The practice of backdating is legal, even if we poor schmucks think it isn't. Just like the Apple case, it is how these options were reported that is the issue. (It's not even like Apple or Pixar failed to report them, they are accused of just doing so "improperly.")
I really don't know if exercising the options will eventually create more shares, that's outside of my knowledge.
Sometimes it does, and sometimes it does not. However, whether options exercise creates more shares is less important.
One way or another, there is no escaping the fact that employee options transfer ownership -- contingent ownership, until exercised -- from the current shareholder to the employee. In that sense it is always "ownership dilution."
Companies usually repurchase shares and hold on to them as "treasury stock" to give to employees when they exercise their options, so as not to increase the # shares outstanding (and pretend that his dilution is not happening). But that uses corporate cash (to buy back the shares), when it could have been used to invest in more value-creating activities.
The practice of backdating is legal, even if we poor schmucks think it isn't. Just like the Apple case, it is how these options were reported that is the issue. (It's not even like Apple or Pixar failed to report them, they are accused of just doing so "improperly.")
It could be a big problem if the improper reporting was done to get a more beneficial tax rate, then it could very well be called fraud.
(I apologize for the multiple posts, but had to make this point.)
This report really puts Jobs in a bit of a pickle, because it raises serious questions about some earlier claims that he didn't know much about options, backdating, accounting rules, and such.
I had always suspected that such claims were not credible, given his roles in a number of publicly traded companies as CEO, or Chairman, or board member, or blockholder.
I'll bet that is why he ended up with an "informal request" from the SEC (vide an earlier news story from a few days prior).
It could be a big problem if the improper reporting was done to get a more beneficial tax rate, then it could very well be called fraud.
Yes, but that is not the issue I raised. The original story characterized the backdating itself as "dishonest." Exactly how and why the options were improperly reported will be determined by the investigation and possibly in a trial.
*sigh* I blame the DotCom Boom/Bust and Enron for this schizimadoooby. (Yes, I made up that word myself). The only thing I am sad to see is the AAPL stock price get hammered for no bloody good reason. But anyways Apple has it's mammoth "3rd growth engine" task that will see it through strongly in 2nd half 2007, 2008 and beyond. Da iPhone. In the mean time maybe I can actually do or read other stuff on the Internet *not* related to Apple.
The AAPL price is based on future speculation. If Apple just stayed where it is now and became a normal company (no splash into phones, no growing video sales, no continuing Mac and iPod expansion, no endless string of surprising new products), AAPL would be much lower, possibly at $50, $40 or $30.
Backdating (as long as all agree openly) is not illegal and is an alternative to paying cash! It's also likely that the legal department at Plixar approved the deal. It's also possible that Jobs signed but did not question the deal. These are the things that need answers!
Companies usually repurchase shares and hold on to them as "treasury stock" to give to employees when they exercise their options, so as not to increase the # shares outstanding (and pretend that his dilution is not happening). But that uses corporate cash (to buy back the shares), when it could have been used to invest in more value-creating activities.
If the shares offered to someone in a stock option were purchased back by a Company at an earlier time, when the price was lower (by way of preparation for known forthcoming stock options or as part of a routine share buy-back policy) it could/would seem normal and natural to offer them to the individual at that earlier and lower price and thereby match the amount of the Company's cash that went into their re-purchase; it would have cost the Company less cash than buying them at today's higher price. Clearly, there would still be tax/reporting complexities but I wonder if this might be another part of the logic as to why a Company (before 2002) would have backdated stock options?
Personally, I think the Feds are wasting resources in a witch-hunt. They are trying to find the next Enron, Andersen, etc. There is a lot of fishy information leaked to the press as well as press/writers trying to hit their next biggest story. If you put the two together, it spells trouble for anyone or any company in the public eyes.
First, I would question the information leaked to the press on a "federal" investigation. Informants my ass, if you are going to put someone in a hot seat, then put you sources on the same level. Why is it that Apple can keep such a tight information on the release of iPhone, yet we are expected to read WSJ articles as if they are the ultimate truth?
I'm not defending S. Jobs, but I am getting really tire of the press/media putting out incomplete information because they think they have a "smoking gun". We are living in an information age, where the truth isn't too far from lies, but I would be very careful listening to WHOEVER is telling the truth. There is always something to gain for an informant and I like to know what this "truth" they are selling is worth.
In short, a man's lost is another's gain. I'm sure S. Jobs is aware of what he'll be losing if this stuff falls through. Ultimately, if they found S. Jobs guilty in "whatever" it is they are trying to nail him for, it'll be lost for Apple Inc. and Apple users. This man alone puts the company and it's innovative products back on the map with his leadership.
Why are people so greedy? Aren't their normal salaries enough without all of this?
I think that is a mischaracterization of the process. It is after all a legal process and used in negotiations when hiring very important people. It can also carry with it in some cases an incentive to make the company better by your hard work so the stock is worth even more although when cashed the next day this clearly isn't the case.
As others have said the whole process has become muddied and misunderstood when there are seemingly so many accounting errors / frauds where companies did not show this backdating and subsequent stock sales correctly. Again as others have said, with turn over the size of Apple and Pixar there seems little need to save a few $s like this deliberately, I have to think (hope) it is poor accounting.
The answer to me seems that it should be made illegal to back date share sales. It's that simple, then companies can use other incentives when hiring. Maybe a corporate jet
Update: Elrtoth pointed out this is now the case : Sarbanes/Oxley thanks Elroth.
Comments
As a shareholder I admit that all this news about Steve Jobs and potentially "illegal" dealings makes me uneasy. But as for the price of the stock ($83 something as of this weekend) if it makes any sense to you, please explain it to me.
Apple announces record earnings, but predicts a conservative upcoming quarter, announces the iPhone to general applause and good expectations, Mac sales show strong growth in the face of a PC sales slowdown, the iPod continues to reign supreme among portable music players and the stock price is down from before New Year's???????
More recently Cisco announced 41 percent profit increases year over year and made an acquisition of a software company that almost all analysts agree was a good move and the stock price is down????
Stop me when this starts making sense to you.....
They are just burning up more cash than before, more than 41% more... :P Profit and Income are two different things. This sort of thing happens all the time.
But as an Apple shareholder, you should think twice about not backdating stock options. Stock options have a certain amount of value based on the "strike" price (the price at which you are given the right to buy the stock) and the current market price. If the options get issued at a backdated price, you don't have to receive as many options to get the same value as you would if they were issued at a current, higher price. If the board of directors decides to pay Steve Jobs $20 million in stock based comp, it is better they do that with fewer options than more so other shareholders experience less dilution. The more you get diluted, the less of Apple's earnings you have a claim on, hence, Apple will have a lower earnings per share.
But if they want to just pay him a bonus, they can also do that. The intent of options is to encourage better future performance that helps stock value, not to be a bonus on previous performance. I suppose there may be differences in taxes that would make a backdated option more worthwhile than a bonus, I don't know.
I really don't know if exercising the options will eventually create more shares, that's outside of my knowledge. The amount in question is relatively small, so even with dilution, I don't think it would be noticed.
<b/>UPDATE: </b> just went back to the page, and there's also a Win-doze Live Search ad.
you guys have a frickin win-doze veestah ad on your site! wtf, man?
<b/>UPDATE: </b> just went back to the page, and there's also a Win-doze Live Search ad.
Glad to know it is legal. As an Apple shareholder I think this practice should stop.
It HAS stopped! None of this continued after 2002, when Sarbanes/Oxley took effect. Before that, when all the backdating was going on, the CEO (of any company) was not responsible for the accounting practices. That changed with Sarbanes/Oxley - now CEOs are required to sign the accounting statements, and can be criminally liable if the statements are wrong. But that was not the case before 2002, when this happened.
As many have said, backdating was not illegal. It's very bad of the writer of this story to say Lasseter's shares were "dishonestly" backdated. It might be dishonest if it was hidden from shareholders and not accounted for properly (which is what the investigation will find out).
Again, everybody - the backdating is not happening now, and hasn't happened for 5 years.
I don't know.....
Now, someone correct me if I'm wrong, but isn't backdating legal? As long as everyone (the board) agrees to the deal?
Oh boy, not that question again...... at this point, that is not the issue!
As a shareholder I admit that all this news about Steve Jobs and potentially "illegal" dealings makes me uneasy. But as for the price of the stock ($83 something as of this weekend) if it makes any sense to you, please explain it to me.
Apple announces record earnings, but predicts a conservative upcoming quarter, announces the iPhone to general applause and good expectations, Mac sales show strong growth in the face of a PC sales slowdown, the iPod continues to reign supreme among portable music players and the stock price is down from before New Year's???????
More recently Cisco announced 41 percent profit increases year over year and made an acquisition of a software company that almost all analysts agree was a good move and the stock price is down????
Stop me when this starts making sense to you.....
The problem is, none of us really knows the quantity and quality of information and expectations that are factored into the stock price. We can only make broad inferences, and your guess is as good as mine or Cramer's or Jobs' or an analyst's. Thus, for example, $83 could have factored in positive earnings surprises and the iPhone, and $96 was hype; alternatively, it is $96 that justifies the earnings surpirses and iPhone, and $83 is a "buy."
Only the future will tell!
In the meantime, the options stuff is a drag. But look, Jobs can put it to rest by coming out and addressing it squarely. (But at this point, his lawyers have probably told him to shut up, and that fits his basic predeliction anyway).
saw Lasseter granted one million shares whose initial value was dishonestly backdated to
You are getting pretty close to libel over here.
The practice of backdating is legal, even if we poor schmucks think it isn't. Just like the Apple case, it is how these options were reported that is the issue. (It's not even like Apple or Pixar failed to report them, they are accused of just doing so "improperly.")
I really don't know if exercising the options will eventually create more shares, that's outside of my knowledge.
Sometimes it does, and sometimes it does not. However, whether options exercise creates more shares is less important.
One way or another, there is no escaping the fact that employee options transfer ownership -- contingent ownership, until exercised -- from the current shareholder to the employee. In that sense it is always "ownership dilution."
Companies usually repurchase shares and hold on to them as "treasury stock" to give to employees when they exercise their options, so as not to increase the # shares outstanding (and pretend that his dilution is not happening). But that uses corporate cash (to buy back the shares), when it could have been used to invest in more value-creating activities.
You are getting pretty close to libel over here.
The practice of backdating is legal, even if we poor schmucks think it isn't. Just like the Apple case, it is how these options were reported that is the issue. (It's not even like Apple or Pixar failed to report them, they are accused of just doing so "improperly.")
It could be a big problem if the improper reporting was done to get a more beneficial tax rate, then it could very well be called fraud.
This report really puts Jobs in a bit of a pickle, because it raises serious questions about some earlier claims that he didn't know much about options, backdating, accounting rules, and such.
I had always suspected that such claims were not credible, given his roles in a number of publicly traded companies as CEO, or Chairman, or board member, or blockholder.
I'll bet that is why he ended up with an "informal request" from the SEC (vide an earlier news story from a few days prior).
It could be a big problem if the improper reporting was done to get a more beneficial tax rate, then it could very well be called fraud.
Yes, but that is not the issue I raised. The original story characterized the backdating itself as "dishonest." Exactly how and why the options were improperly reported will be determined by the investigation and possibly in a trial.
Companies usually repurchase shares and hold on to them as "treasury stock" to give to employees when they exercise their options, so as not to increase the # shares outstanding (and pretend that his dilution is not happening). But that uses corporate cash (to buy back the shares), when it could have been used to invest in more value-creating activities.
If the shares offered to someone in a stock option were purchased back by a Company at an earlier time, when the price was lower (by way of preparation for known forthcoming stock options or as part of a routine share buy-back policy) it could/would seem normal and natural to offer them to the individual at that earlier and lower price and thereby match the amount of the Company's cash that went into their re-purchase; it would have cost the Company less cash than buying them at today's higher price. Clearly, there would still be tax/reporting complexities but I wonder if this might be another part of the logic as to why a Company (before 2002) would have backdated stock options?
Personally, I think the Feds are wasting resources in a witch-hunt. They are trying to find the next Enron, Andersen, etc. There is a lot of fishy information leaked to the press as well as press/writers trying to hit their next biggest story. If you put the two together, it spells trouble for anyone or any company in the public eyes.
First, I would question the information leaked to the press on a "federal" investigation. Informants my ass, if you are going to put someone in a hot seat, then put you sources on the same level. Why is it that Apple can keep such a tight information on the release of iPhone, yet we are expected to read WSJ articles as if they are the ultimate truth?
I'm not defending S. Jobs, but I am getting really tire of the press/media putting out incomplete information because they think they have a "smoking gun". We are living in an information age, where the truth isn't too far from lies, but I would be very careful listening to WHOEVER is telling the truth. There is always something to gain for an informant and I like to know what this "truth" they are selling is worth.
In short, a man's lost is another's gain. I'm sure S. Jobs is aware of what he'll be losing if this stuff falls through. Ultimately, if they found S. Jobs guilty in "whatever" it is they are trying to nail him for, it'll be lost for Apple Inc. and Apple users. This man alone puts the company and it's innovative products back on the map with his leadership.
Why are people so greedy? Aren't their normal salaries enough without all of this?
I think that is a mischaracterization of the process. It is after all a legal process and used in negotiations when hiring very important people. It can also carry with it in some cases an incentive to make the company better by your hard work so the stock is worth even more although when cashed the next day this clearly isn't the case.
As others have said the whole process has become muddied and misunderstood when there are seemingly so many accounting errors / frauds where companies did not show this backdating and subsequent stock sales correctly. Again as others have said, with turn over the size of Apple and Pixar there seems little need to save a few $s like this deliberately, I have to think (hope) it is poor accounting.
The answer to me seems that it should be made illegal to back date share sales. It's that simple, then companies can use other incentives when hiring. Maybe a corporate jet
Update: Elrtoth pointed out this is now the case : Sarbanes/Oxley thanks Elroth.