From Matvey Shindel: “I have just received a proxy statement from a large corporation whose board of directors wants to triple the [authorized] number of [shares of] common stock. They want to have these shares ‘just in case’ for all sorts of things, from the employee savings plan to business expansion. I own a few shares of this company, and I am wondering whether issuing billions of additional shares would reduce the value of existing shares. Could you please comment on this? Spasibo.”
As you know, the board is seeking your permission not to split the pie into more, thinner slices right now, but rather the authority to do so in the future. Whether doing so in the future reduces the value of the existing shares naturally will depend on what they do with any newly issued shares. At one extreme, imagine that for just 10,000 low-priced shares, they were able to acquire an oilfield that turned out to be worth $50 billion once a few wells were drilled. Wow! Now imagine that they used 100 million shares to acquire the same land, but the geologist who recommended it had become confused by a USA Today article noting that bottled water today sells for more than gasoline and so had recommended purchase of what turned out to be a rich field of subterranean water.
If you think the management is smart – as I assume you do, or you wouldn’t hold the shares – then let them do what they think will build value. They may not be smart, but they certainly wouldn’t purposely try to lower the value of your shares, because that would lower the value of their stock options. (Nye za shto.*)
*Note to non-Russian speakers: Ya tridsat’ lyet uzhe staralsa uchit rooskii yazik, i yeshchaw nye mogoo! (Which may or may not mean: “I have for thirty years already been trying to learn the Russian language, and still I can’t.”)
Quote of the Day
A good listener is not only popular everywhere, but after a while he knows something.~Wilson Mizner
Request email delivery
- Aug 22:
Do You Make More Than $5 Million A Year?
- Aug 21:
A Well-Regulated Militia
- Aug 20:
Amazing iPhone Tip: You Have A Free Scanner!
- Aug 18:
400 Years Later
- Aug 16:
$5,000 For A New Knee; $400,000 For Literally Nothing
- Aug 15:
Bush 43’s Chief Speechwriter On Trump
- Aug 14:
Need A New Hip? A New Heart? Some Tomatoes?
- Aug 13:
Loving My Burgers
- Aug 12:
- Aug 10:
- Aug 22: