Saturday, August 26, 2006

The Fox Guarding the Hen House....

One of my loyal readers--perhaps the only one--has recently complained about my not getting irate about something recently, so I promised that I would. I read the recent news online, and found this little article labeled "U.S. management-led buyouts soar." If that's not something to get your blood boiling, nothing will!

In a nutshell, what happens is that the management of a publicly traded company decides to take the company "private"--which means they own the company and you do not. Let's take a made-up example to make this clear.

The management of a company named Fuku decides that the stock is dirt cheap at $10. Too cheap, in fact. It really should be much higher--perhaps $20/share. Rather than wait for people to wake up and notice this absurdly low price, they offer to buy it themselves for $15/share. The shareholders, allegedly, are happy since they've just nabbed themselves a 50% profit overnight. The management is happy because they just screwed you out of $5 per share!

If there's one thing that management cares more about than shareholders--and remember, their job is to please and answer to YOU above all else--it's themselves. It should be absolutely criminal to allow management to act as both the seller of a publicly traded company and the buyer of the same company. Talk about major conflicts of interest!

All publicly traded companies trade over and below their true value for extended periods of time. When they trade below their intrinsic value, the management should be purchasing shares and retiring them to improve the fortunes of the shareholders. When shares trade above their real value, management should THEN start looking to sell shares to any idiot that would buy overpriced shares.

It's good business. And a CEO that wants to sell out the company out from under you when it's underpriced? That's a CEO that needs to get the boot. Any board members who support such an action should likewise get the boot.

Never, EVER sell out to insiders! They know more about the company than you do, and they're only going to buy when they know they can screw you out of money that's rightfully yours to begin with. Just say no to management-led buyouts! Then boot the management out of office. You can do better than that.

1 comment:

W&MGrad said...

Boy, there really isn't that much to get upset about, is there? I would ahve expected a tirade about how geocachers are taking over the haunts of letterboxers. Oh well, you should have some chocolate terminator milkshakes. That will get your pulse up! :-D