eBay Clings to Its Options Habit

If shares of eBay (EBAY Quote) are a good thing, then managers of the sexiest company on the Internet may be getting too much of a good thing.

Over the past three years, eBay has been one of the most generous givers of options, even among technology companies known for their open-handed option allocations. And while there's no sign yet that eBay investors are concerned about the company's option grants -- eBay shares hit a new 52-week high Tuesday and closed up $3.61, or 3.6%, at $103.05 -- shareholders' equity is diluted when options are granted. And if regulators prevail with a plan to force companies to treat stock options as a regular cost of doing business, the price of options would become even more direct.

At the end of last year, there were 1.2 shares in unexercised stock options for every 10 eBay shares outstanding. At Tuesday's market capitalization, that means options on eBay shares (vested and unvested) worth nearly $4 billion are held by company employees. ...