Expensing Stock Options

[taxionewire]

Heard that Stock Options will have to be expensed. It would seem to me that companies like JBLU that make options the bulk of compensation will be hit the hardest. Any thoughts?

 

[#1 Windmilling]

I'm not sure if "bulk" of compensation (at least for the pilots) is entirely accurate. Each employee at JBlue who holds a certificate from the FAA (i.e. mechs, dispatchers, pilots) is granted options upon hire. For the pilots this amounts to 6000 options vested over a 7 year period. Most of the pilots (I fly with) don't count on these options (as many of the pilots' options are underwater right now) rather they see them as free money if and when they go positive. Do they offer incentive for the pilots to stay with the company? I am not so sure. I know of a few pilots who have bailed JB for other jobs recently. One guy went corporate, another back to CAL and yet another left for Fed Ex. Now, if we talk about options for management, that is another story. Certainly the options granted to upper management at JB are significant. If you read through the Notice of Annual Shareholder Meeting of Stockholders from May 26th, 2004 from Jet Blue, you will notice that David Neeleman is the ONLY member of the Special Stock Option Committee board. According to the report, David has "full power and authority, subject to any limitations the Compensation Committee may impose from time to time, to make discretionary stock option grants under the 2002 Stock Incentive Plan." So you may want to ask David directly. Also, according to the report, in Fiscal 2003, the only senior officer who was granted options was AL Spain, to the tune of 22,500 shares which represents 0.6 % of total options granted to employees in the fiscal year. His exercise price was $31.77 with an expiration date of 8/11/13 and a present day vaule (at time of publication for the report) of $335,700. This is interesting as Al was very vocal about a pilot raise only to change his tune and backtrack from his previous statement about pay rates comparable to SWA for JB pilots. Look, I am not trying to stir the pot, but with the rest of the industry moving down toward our wages, JB will find itself in an ever-increasing competitive environment. David was once quoted as saying that JB will never have a losing quarter (right after the IPO) and yet here he has stated that we may lose money in the 4th or the 1st quarter of next year. Interesting times for sure. It pays to be humble and it pays to treat your customers right! Out!


-#1W

 

[savin47]

#1 Blowhard..... What? The person asked for thoughts not incoherent rambling.

Most of the stock options that could be expenced have already been given out.

 

[StaySeated]

The "expense" is felt on the company end, not the holder of the option. This development stems from the desire for companies to more accurately state their earnings. Anyone granted options does not reallize income or loss until those options are excercised and then sold. The only companies that will be affected by this are the ones that base an enormous amount of salary/bonus on stock options like the tech sector and even in that case the reciepient of the stock options will not feel any difference. If you pay attention to this sort of thing, earnings, p/e, and dividends will be affected for some companies, but no airline or airline employee will notice this change.

 

[Schwanker]

Has anyone ever paid attention to the huge insider selling on JBLU? This has been going on for over a year now. Unfortunately, the CEO isn't on the insider roster, but I understand he also unloaded tons of stock / options.

See link:



http://finance.yahoo.com/q/it?s=JBLU

 

[jetblue320]

Has anyone ever paid attention to the huge insider selling on JBLU? This has been going on for over a year now. Unfortunately, the CEO isn't on the insider roster, but I understand he also unloaded tons of stock / options.

See link:



http://finance.yahoo.com/q/it?s=JBLU

That's because his stock (as well as a few others on the Board) is "preferred stock" and comes under a different category.

Folks are making a mountain out of a molehill about this.

Try not to let it ruin your holidays.

 

[roughneck]

His exercise price was $31.77 with an expiration date of 8/11/13 and a present day vaule (at time of publication for the report) of $335,700.

How are his options worth $335,700 when the stock is trading in the low $20's? Just curious, I must have missed something.

 

[Schwanker]

That's because his stock (as well as a few others on the Board) is "preferred stock" and comes under a different category.

Folks are making a mountain out of a molehill about this.

Try not to let it ruin your holidays.

Sound a bit thin skinned over this. The FACT is insiders are pulling HUNDRED$ of MILLION$ of dollars out of this stock while the stock has fell over 50% since last October. Insider selling just this month has been huge. With the stock down so much, why wouldn't they find this as a buying opportunity. To me, I see insider activity, especially at the executive level, as an indicator of their confidence in the company. Maybe the quarterly earnings report will shed some light. Hopefully this is just a molehill. Time will tell.

By the way, this new law could impact Neeleman and Co.

Thanks for your concern, but my holidays are just fine.

MERRY CHRISTMAS,
SCHWANKER

 

[#1 Windmilling]

Exercised his options at $31.77 while strike price was $16.85. 31.77 - 16.85 = 14.92 * 22,500 = $335,700. Savin, relax there 'ol buddy, and it's expensed. Furthermore, Jet Blue hires about 20-24 pilots a month and doles out 6,000 options per pilot. If they hire 250 pilots next year, the company will have to count 1,500,000 options as a cost on the balance sheet.