Forum Archive Index - November 2003

[mixtrader <mixtrader@clear.net.nz>]

Hi Terry

 

Forgive me if my understanding is wrong but I understood that options have two components, the option price and the exercise price.  The exercise price is often the market price at the time the options were offered (less the value attached to the option at issue).  Depending on the type of option it may either be exercised at any time until the expiry date, or may be exercised only on the expiry date.  If it is not exercised by or on expiry date the option lapses and is valueless.  Exercise of the option requires payment of the exercise price.  As such, the extent of dilution is the net difference between exercise price and market value at the time the options were exercised.  Obviously, if market value is below exercise price only a fool would wish to exercise the options.  My understanding is that the number of shares now held is increased and at the same time the total share capital is increased through payment for the exercise of the options.

 

Options granted/sold should be recorded in the financial statements along with the average option price and the exercise value.  I haven't checked WRI's statements to verify this has occurred here but I have seen it with other companies.  Options are often "granted" to directors and executive management as a form of performance based incentive (which brings with it problems of short term thinking/planning), they must still pay the exercise price to convert these options to shares.  Options are also freely traded on the market and can act as a source of cash inflow to the company through selling options.  If the options aren't exercised the company got the money for nothing.  If they are exercised the shareholders total capital is increased to the extent of the exercise price, and the total number of shares on issue is increased at the same time.

 

For Marathon's percentage of shares held to have dropped by 0.57% due to the exercise of options suggests that approx 9.25 million options were exercised.  The question I am left with is, how much has the value of Marathon's holding changed in the period between the option holder acquiring the options and subsequently exercising them?  While votes may be diluted I would suggest that market value of their holding has been significantly increased over this period.

----- Original Message -----

From: terry weston

To: sharechat@sharechat.co.nz

Sent: Monday, November 17, 2003 10:59 AM

Subject: Re: [sharechat] Dilution of Shares ----- WRI

http://stocknessmonster.com/news-item?S=WRI&E=NZSE&N=94709

 

It affects even the big guys .  they just lost  .57%

When will this dilution stop?

 

WRI
17/11/2003
SSH

REL: 0956 HRS Wrightson Limited

SSH: WRI: SSH Notice Received

NOTICE 21124 DETAILS

Submitted Date        : 17-Nov-2003 09:56
Status                : Accepted

  Substantial         : Y  Director            : N
  Add Holder          : N  Change Holder       : Y
  Ceased Holder       : N  Change Nature       : N

Issuer Code           : WRI Wrightson Limited
Holder                : Marathon Asset Management Ltd

Address               : Orion House
                      : 5 Upper St Martin's Lane
                      : London
Country               : United Kingdom

Contact Name          : Simon Daniels
Phone                 : 207 497 2211

Total of Interest     : 11082900
Total Issued          : 138697202
Total %               : 7.99

Class                 : WRI
Votes Attached        : 1

Beneficial
   Total of Interest  : 11082900
   Current % held     : 7.99
   Last % held        : 8.56

Non Beneficial
   Total of Interest  :

Description           :
   The holding fell below 8% as a result of the exercise of share options
   rather than through transactions undertaken by marathon.
Documentation
   With Notice        : No
   Not Filed          : Yes
   Been Filed         : No
Number of pages       : 1

Date of Last Notice   :

Submitted By          : Simon Davies on 17-Nov-2003 at 09:56
End CA:00094709 For:WRI    Type:SSH        Time:2003-11-17:09:56:08