Do you remember the summer of 2002 when CEOs were going to have to start signing off on their earnings reports and the dire penalties that would befall any CEOs that signed off on reports with mistakes?
This was going to cause all sorts of havoc, earnings were going to be filed late and stocks were going to fall hard starting on the day that the new procedure took effect.
Do you remember what happened next? Neither do I because it was a complete non-event. The build up for this happened over many months. The market lived with the idea of this new thing and one way or another priced it in.
The market starts to price news in as soon as it is learned, it does not wait for it to go into effect.
That is where we are right now with options expensing. I can't imagine that options expensing is not already priced in. That's just not how the market works.
I'm sure any mediocre accounting student could out-debate me on this point but the history for this sort of thing repeats a lot.
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3 comments:
Here, Here! Very well stated.
However, I do expect short term pot holes around earnings announcements for the more prominent options using companies. That's another traditional market mechanism at work: moving stock from weak hands to strong.
I wouldn't say it was a non-event. Considering the time, effort, and money that has been spent on S-Ox compliance that could have been directed at managing the company, it has been anything but a non-event for me. Has it been as catastrophic as predicted? Of course not. But watching companies opting for delisting instead of having to comply gives a hint at how onerous the new regs are.
Regarding option expensing, a lot of it is already priced in when you do the fully diluted EPS calculation.
exactly my point, priced in.
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