We conduct a detailed review of 10-Q and 10-K reports. Quarterly SEC filings are required to show all outstanding stock options as well as the conversion expectations given a range of future stock prices. We use these documents to help understand how the share count could change under different price scenarios.
Are there any insider lock-up expirations on the horizon? Is it conceivable that the company may complete a secondary offering? While employee stock options are potentially a powerful motivator, watch out for shady practices like re-issuing of underwater options or any formal investigations that have been made into illegal practices like options backdating. With real estate, we look to see if there is any inventory that could be brought to market nearby?