Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

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Wednesday, August 30, 2006

Is The Market Getting Over Options Backdating?

From Ticker Sense

During the latest reporting period for quarterly earnings, it seemed as though any mention of stock options in an earnings release or conference call, no matter how good the earnings report was, caused the stock to drop. Shoot first ask questions later, was the rule of the Summer.

Today, however, we saw an exception to that rule. Restoration Hardware (RSTO) beat EPS forecasts on stronger than expected revenues, and also raised guidance. In addition the company reported that it used "incorrect measurement dates with respect to the accounting for certain previously granted stock options." Instead of the stock going down 18% on the options news, the stock is currently up 18% on its strong earnings news. Now we realize this is only one data point, but it is something to watch for going forward. If more companies start to react in similar fashion, then maybe we can finally say that this issue is fully priced into the market

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