ESORS

« The Stones | Main | Exploding Radio (continued) »

ESORS

I learned a new acronym today.

ESORS.

It stands for Employee Stock Option Reference Securities.

Cisco announced yesterday that it plans to create a limited number of these securities and sell them to a limited number of institutional investors. ESORS are designed to match as closely as possible the terms of an employee stock option that Cisco issues to its employees.

By creating a parallel security and selling it in a third party transaction, Cisco can determine exactly what its options are worth. My guess is that Cisco is hoping that the ESORS won't be worth nearly as much as the accountants are suggesting. And so by doing this, they can reduce the compensation charge they have to take when they issue the options.

I think its an interesting development.

UPDATE: Oliver Weiner said it better in his comments to this post, so I am posting them here:

i think that the importance of this development is completely being understated. forget the ramifications for csco and tech co's in particular, but for all companies to be able to utilize a simliar model. what csco did is brilliant, they said to investors, ok so you want us to lower valuations b/c of options and make ourselves cheaper through accounting, instead of guessing, why dont you (the investor community) tell us what they are worth. its true capitalism through markets. its a natural extension. however they will need to be commoditized and tranched (kind of like traded mortgage related securities). this will not be smooth transistion but is a significant development to watch in the maturation of the US corporation which in turn is de facto model global corporation.

I'd love Six Apart to make it simple for me to elevate a comment to a post. So many great comments get wasted behind the front page.

Comments (10) | | TrackBack (4)

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d83451b2c969e200e550221f318833

Listed below are links to weblogs that reference ESORS:

» Moving Comments Up from Tom Watson
Fred says this: [Read More]

Tracked on May 12, 2005 12:08:16 PM

» Cisco Launches Security to Track Employee Stock Options from robhyndman.com
Cisco has announced that it will be creating a new security that tracks employee stock options. The idea is to sell a limited number to institutions, for the purpose of determining the value of the security (other than by relying on a theoretical Bla... [Read More]

Tracked on May 12, 2005 10:12:40 PM

» ESORS - New Way to Expense Stock Options from Ari Paparo Dot Com
Cisco is performing a little jujitsu on the busybodies in the accounting and regulatory world. You want us to expense... [Read More]

Tracked on May 14, 2005 12:05:38 PM

Tracked on May 17, 2005 9:18:10 PM

Posted May 12, 2005 in Venture Capital and Technology

Comments

i think that the importance of this development is completely being udnerstated. forget the ramifications for csco and tech co's in particular, but for all companies to be able to utilize a simliar model. what csco did is brilliant, they said to investors, ok so you want us to lower valuations b/c of options and make ourselves cheaper through accounting, instead of guessing, why dont you (the investor community) tell us what they are worth. its true capitalism through markets. its a natural extension. however they will need to be commoditized and tranched (kind of like traded mortgage related securities). this will not be smooth transistion but is a significant development to watch in the maturation of the US corporation which in turn is de facto model global corporation.

Posted by: Oliver | May 12, 2005 9:10:58 AM

Like most free-market solutions to man-made problems, I think this is a brilliant move. I am curious to see how the market treats the ESORS.

Posted by: Cem Sertoglu | May 12, 2005 11:00:12 AM

I believe this is similar to the proposal IBM submitted to the SEC...and the SEC shot it down. We'll see if Cisco has better luck.

Come to think of it, this is similar to a proposal Cisco made last year...which didn't go anywhere. I'm not sure what is different this time.

Posted by: Scott | May 12, 2005 3:08:02 PM

'Derivative' financial products are great solutions to pricing dilemmas.

I am surprised that there has not been 'similar' activity in the private equity space.

I hope to see Venture-based futures products traded on the Chicago Mercantile Exchange in my lifetime!

Posted by: James Bachman | May 12, 2005 6:41:48 PM

Some other thoughts:

1) If the underlying value the market assigns to these securities is less than the perceived value the employees are currently assigning to their options, does this have implications for hiring? Even for an icon like Cisco.

2) Most employee option plans I've reviewed usually have a clause restricting the employee from pledge, assign, etc. the option. But I think these securities would do wonders for employees’ ability to hedge risk themselves, by going short the securities (all things equal).

3) The liquidity of these securities will be interesting to watch, particularly relative to longer term warrants or options on many tech stocks currently available.

Posted by: BB | May 12, 2005 9:08:01 PM

I have been reading with interest many of teh observations reagrding the report first issued by Bloomberg on May 12-2005 covering the innovative Stock Option pricing instrument introduced by Cisco.

The part of the story that has not been told is that the concept and original idea for this 'derivative" instrument I believe is the brainchild of Whitney Ross not Cisco or Morgan-Stanley. Mr. Ross (an ex-Lehman Brothers investment banker)came up with this idea in October 2004 while working with our firm to market a stock option valuation that I had produced, which is really a modified version of Black-Scholes.

While Whitney was researching the product offering and reviewing FASB rules etc. he came upon the idea of the market traded derivative that would mirror the employee stock options and provide a free market pricing vehicle.

Mr. Ross has been in New York working with a number of people researching and perfecting the product since late last year.

He introduced the concept to the stock option coalition (of which Cisco is a key member)under NDA in early January.

Ross filed a patent covering the derivative shortly thereafter.

We do not believe that mystically Cisco and Morgan-Stanley had a brainchild with exactly the same characteristics as what Ross invented at the same time.

We have not been able to ascertain at what time Cisco and Morgan-Stanley originally discussed this proposal, so can not categorically rule out the possibility that they did come up with this idea first no matter how unlikely. In the meeting Whitney had with the coalition there was no mention, discussion or indication of any kind that such a derivative product had ever been conceived. Cisco was introducing variations on the Black-Scholes model well into this year, providing further indication that they had not conceived this concept prior to having it introduced by Ross.

Whitney has substantial documentation of this concept, including chronology of events and the patent application itself and is available for interview if any of you with the press have an interest.

Carl Dilley
Managing Partner
Spartan Securities Group, Ltd
carl@spartansecurities.com
100 First Avenue South, Suite 287
St. Petersburg, Florida 33701
Tel (727) 502-0508
Fax (727) 287-1691

Posted by: Carl Dilley | May 17, 2005 9:13:57 PM

curseurs - cuteftp - dessert - desserts - dessin - directx download - downloads - ecran de veille - ecrans de veilles - edonkey - effet d optique

Posted by: emoticone | Sep 27, 2005 1:13:19 PM

Posted by: ad aware | Nov 17, 2005 9:18:59 AM

amateur couple amateur gay amateur gratuit amateur libertin amateur nu amateur porno amateur sex amateur sexe amateur video amateur webcam amateur x amateur anal fisting anal anime asiatique nu asiatique bite black anal blacks on blonde webcam gratuit webcam sexe femme black webcam chat cul cul gratuit couple amateur erotique ejac feminine ejac facial defloration coquin blonde salope bondage voyeur gratuit erotique gratuit bukkake cul de femme black teens ejac faciale chatte chatte humide double anal film x amateur free porn movies femme mature femme nu femme erotique femme facile xxx fetichisme femme mure film amateur femme en chaleur femme cochon film sexe femme sex x amateur femme coquin femme mure nu femme sexe fille facile femme nu gratuite film sexe gratuit femme photo hardcore gros penis grosse salope hentai x histoire erotique young porn gros teton gratuit sexe jeune gay video grosse femme grosse bite jeune femme gros sein gros cul gros sexe jeune amatrice hentai jeune chatte jeune femme nue hard sexe jeune lesbienne mangas erotique jeune nu voyeur france mangas sexe jeune vierge mature lesbian mature gratuit lesbienne nu mamie jeune gay masturbation femme lesbienne photo lesbienne gratuit lesbienne gratuite jeune sexe jeune salope lesbienne jeune fille voyeur mature mature sex sex mangas sexy lingerie video coquin video de cul transsexuelle sexe video sexy mature triple penetration video amateur video amateur x sexe vieille sexe mature sexe porno sex xxx teen amateur sexe webcam sex femme video cul gratuit sexe video gratuit teen porn sexe video gratuite sex mature sexe photo mature women photo gratuite sexe photo de cul photo gay gratuite photo de cul gratuite photo amateur mure petite chatte photo salope photo lesbienne mature sexe video hentai video lesbienne photo gay gratuit photo femme video erotique partouze photo cul gratuite photo sexe amateur photo de chatte penetration photo gratuite femme nu photo fille photo xxx portail du sexe photo sein photo sexe gratuit video salope porn porno asiatique photo sexe porno mature porno black sein de france video mature photo sexe gratuite sein salope gratuit photo transsexuelle porno amateur photo voyeur porno sexe poitrine salope salope gratuite video sexe sexe femme video xxx gratuit sexe hard gratuit sexe fr sexe amateur gratuit sex amateur gratuit sexe en direct sexe gratuit photo sexe hard sexe gratuis sexe gratuit sexe feminin sexe amateur sexe gratuit video video sexe gratuit video xxx sein enorme sein gratuit sexe sexe gaulois sex amateur sexe extreme sexe hardcore blague codec divx ad aware antivirus divx a telecharger antivirus en ligne chanson a telecharger codec telecharger carte postale ancienne antivirus gratuit blague humour divx codec carte postale virtuelle blague blonde divx dvd clone cd bitdefender carte postale antivirus a telecharger antivirus gratuit a telecharger emule telecharger gratuit film gratuit a telecharger film porno a telecharger film porno gratuit a telecharger film x a telecharger fond d ecran a telecharger horoscope horoscope cancer divx gratuit edonkey edonkey 2000 emoticone a telecharger emoticone a telecharger gratuit emule france emule gratuit emule telecharger film a telecharger emule film x gratuit a telecharger firewall horoscope taureau horoscope verseau jeu a telecharger jeu pc a telecharger jeux a telecharger jeux a telecharger gratuit jeux a telecharger sur pc jeux de voiture jeux flash a telecharger horoscope capricorne horoscope chinois horoscope du jour horoscope gemeau horoscope gratuit horoscope lion horoscope poisson horoscope sagittaire horoscope scorpion horoscope vierge imesh kazaa msn messenger 7.5 telecharger messenger 7.5 mp3 gratuit telecharger mc afee logiciel gratuit mp3 gratuit msn messenger telecharger kazaa telecharger messenger mp3 telecharger logiciel antivirus msn messenger plus kazaa lite telecharger kazaa lite logiciel architecture mp3 telecharger gratuit msn 7.5 telecharger msn messenger 7.5 messenger msn recette partition guitare nero burning rom partition de musique musique mp3 musique mp3 a telecharger nero 6 norton antivirus 2005 nero express nero norton 2005 musique a telecharger gratuite musique musique a telecharger gratuitement norton musique a telecharger gratuit nero burning musique a telecharger msn telecharger partition gratuite recette minceur recette de salade shareaza telecharger recette gateau chocolat recette punch recette courgette recette gateau recette cocktail sims 2 telecharger recette sangria recette pain recette facile sims 2 telechargement recette paella recette crepe recette de cuisine recette dessert recette de julie recette de confiture recette barbecue telecharger kazaa lite gratuit telecharger emule telecharger les sims gratuitement telecharger kazaa little telecharger kazaa gratuitement telecharger gratuitement msn telecharger kazaa lite telecharger emoticone telecharger emule gratuit telecharger kazaa en francais telecharger gratuitement kazaa telecharger e mule gratuit telecharger gratuitement msn messenger telecharger divx gratuit telecharger les sims 2 telecharger les sims gratuit telecharger jeu flash telecharger kazaa gratuit telecharger gratuitement logiciel telecharger emule gratuitement solution jeu telecharger divx solution jeu video telechargement gratuit de film telecharger clone cd telechargement film x gratuit telechargement logiciel telechargement film divx telecharger antivirus gratuit solution telecharger codec divx telechargement film telecharger chanson skype telechargement film porno gratuit telechargement film porno telecharger acrobat reader telecharger antivirus tablature guitare tablature telecharger mp3 telecharger mp3 gratuitement telecharger msn telecharger msn 7.5 telecharger msn 7.5 francais telecharger msn 8.0 telecharger msn gratuit telecharger msn gratuitement telecharger msn mesenger telecharger msn messenger 7.5 telecharger msn messenger 8.0 telecharger msn messenger plus telecharger msn plus telecharger music mp3 telecharger musique gratuite telecharger logiciel divx telecharger logiciel gratuit telecharger logiciel mp3 gratuit telecharger messenger telecharger messenger 7.5 telecharger winamp telecharger windows messenger telecharger winzip telecharger winzip gratuit telecharger yahoo messenger zone alarm telecharger nero telecharger nero 6 telecharger nero gratuit telecharger nero gratuitement telecharger norton antivirus 2005 telecharger shareaza telecharger shareaza gratuit telecharger shareaza gratuitement telecharger video telecharger video porno gratuit telecharger video sex telecharger video x

Posted by: amateur couple | Nov 30, 2005 8:06:36 AM

Hey Carl,

Go back to ripping off your investors...

Posted by: Yeah Right | Apr 7, 2007 12:31:19 PM

A VC

Musings of a VC in NYC

ESORS

TrackBack

Comments

Post a comment

Ads

Flickr Photostream more →

A VC

Musings of a VC in NYC

ESORS

TrackBack

Comments

Post a comment

Main RSS Feed of All Posts

Ads

Flickr Photostream more →