Apple Shareholder Lawsuit Dismissed

explosivejared wrote with a ZDNet article about Apple's win in the shareholder stock-options backdating lawsuit. This jives with Apple's own internal investigation of the matter. "The New York City Employees Retirement System had sued Apple claiming that the company's practice of backdating stock options diluted the value of the stock. Apple has admitted that it improperly backdated stock options on several occasions, including two awards to CEO Steve Jobs, and last December it took a $84 million charge to account for the options. But the suit had to show that Apple shareholders lost money in order to recover damages ..."

Re:So basically...

[nelsonal]

This deals with options the company grants to employees, which are an expense, but one paid (eventually) with shares of the company. The options were granted with value, which should have been reflected on the income statement, but the value won't be paid directly, rather the company will create and issue new shares which don't have a "cost" to the company, but reduce the proportion of ownership that the remaining shareholders own. Apple said the options were issued on a certain day with the price on that day as the strike price, (which accountants still allow to be called a no cost transaction) but the options were actually issued later when the stock was at a higher price.
This is especially interesting because when back dated options are granted to employees, fewer shares are required (because the options are already in the money) so the ultimate hit to other shareholders is smaller, but accountants would require an expense be created reducing current earnings, so the company decieved the accountants and shareholders on the day the options were granted.