[pedrocr]

> However if management has options to buy 5 shares at say, 25 cents, they gain significantly more because the total number of shares has been diluted but the NPV is still the same.

Yeah, that has been discussed in a few other comments. There's nothing stopping you from doing the same deal with dividends by giving out the dividend as well as adjusting the outstanding options, or adding clauses to the options to fix this case by changing the strike price or number of options in case of share buybacks.

The article doesn't argue that though, it's saying that since not all shares are retired and some are used as compensation that the value of the buyback isn't all given to shareholders. In reality those two transactions (buyback and issuing shares as compensation) are completely separate transactions that don't depend on each other.

[sah88]

TBH I don't really understand the arguments in the article I was trying to be as charitable as possible to the general premise.

Also I think I am wrong. Stock options are public information so it should be incorporated into the price of the stock any ways. Theoretically at least.