Well, I think the point is that issuing more stock already shows up in the earnings per share data so there is not a good reason to double count it.
A company that issues stock to employees is not losing money, what it's doing is transferring some wealth from one group of shareholders to a different group of shareholders.
This hurts the bottom line of the first group and helps the bottom line of the second, but it does not hurt the balance sheet of the company.
Likewise if a company votes to give a special dividend to a preferred stock and reduce the dividend to common stock by the same amount, then this hurts one group of shareholders over another, but it does not cause the company to incur a loss.
And as the company's balance sheet is unchanged. its income statement should not be changed either.
The flipside is to believe that the balance sheet should be changed because the liability increases by the amount of new stock. This is false because the liability has to be valued at market value and shareholder issuance only dilutes the value of an individual stock, it does not increase the shareholder equity.
This treatment where GAAP rules misvalue the change to liability from share issuance rears its head when valuing share buybacks. Here too, they are valued at the purchase price, which creates all sorts of misvaluation problems for firms and creates the opportunity for mismanaging of corporate funds by purchasing shares high and selling them low, which really should result in a loss for the company, but according to the GAAP rules there is no loss because the equity is valued by the purchase price/price at grant and does not take into account the market price.
So from this one bad rule comes other misvaluations that distort the balance sheet of a company and impede financial analysis. And all of this stems from a desire to discourage corporate behavior in share issuance rather than from a desire to accurately value the company.
So I'll go by the non-GAAP figures.
A company that issues stock to employees is not losing money, what it's doing is transferring some wealth from one group of shareholders to a different group of shareholders.
This hurts the bottom line of the first group and helps the bottom line of the second, but it does not hurt the balance sheet of the company.
Likewise if a company votes to give a special dividend to a preferred stock and reduce the dividend to common stock by the same amount, then this hurts one group of shareholders over another, but it does not cause the company to incur a loss.
And as the company's balance sheet is unchanged. its income statement should not be changed either.
The flipside is to believe that the balance sheet should be changed because the liability increases by the amount of new stock. This is false because the liability has to be valued at market value and shareholder issuance only dilutes the value of an individual stock, it does not increase the shareholder equity.
This treatment where GAAP rules misvalue the change to liability from share issuance rears its head when valuing share buybacks. Here too, they are valued at the purchase price, which creates all sorts of misvaluation problems for firms and creates the opportunity for mismanaging of corporate funds by purchasing shares high and selling them low, which really should result in a loss for the company, but according to the GAAP rules there is no loss because the equity is valued by the purchase price/price at grant and does not take into account the market price.
So from this one bad rule comes other misvaluations that distort the balance sheet of a company and impede financial analysis. And all of this stems from a desire to discourage corporate behavior in share issuance rather than from a desire to accurately value the company.
So I'll go by the non-GAAP figures.