Share appreciation rights SAR - Dilution
Hi all, have a bit of technical question with regard to dilution and SAR.
Doing a valuation model at the moment as prep for my SA position this summer at a BB and came across share appreciation rights. I tried to use the 'classic' resources such as Rosenbaum and McKinsey book but didn't find anything useful.
The way I understand SAR is that the company pays the difference between the strike price and the current share price (share appreciation) to the holder of the SAR. However, sometimes they are paid in cash and sometimes in stock.
How would you account for that in the dilution of the shares? As I couldn't find exact info in the annual report I just assumed the 'worst' case wrt to dilution and assume that the company issues shares for the payment. Thus my dilution is [(Current Share Price - Average Strike Price) / Current Share Price].
Is this the correct way of handeling SAR?
Thank you for your help!!!
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