Most companies have an authorization to issue many more shares than presently outstanding. Just looking at companies within the industry, however, manifests this reality. Estee Lauder, which I sold in favor of Parlux, has an authorization to issue 300 million shares of Class A common stock, yet at present has only 60 million shares outstanding. Of its Class B stock, 57 million of the 120million authorized shares has been issued. For Avon, at its Annual Meeting on May 2, 1996, the shareholders approved an amendment to the Company's Certificate of Incorporation to increase the number of shares of common stock authorized from 200 million to 400 million. The number of shares of Common Stock (par value $.25) outstanding at October 31, 1996 was 133 million reflecting a two-for-one stock split distributed in June 1996. For Revlon, as of November 1, 1996, 19.9 million of the 350 million authorized shares of Class A Common Stock were outstanding, while 31 million of the 200 million authorized shares of Class B Common Stock were outstanding. Mind you all three of the companies have considerably smaller book values and year-to-year growth ratios, and much larger debt to equity ratios. They look very bad next to Parlux.
Its customary to authorize a bunch of shares at a time so that they are readily available to quickly raise money just as Parlux did. I don't consider any of their managerial actions unusual. I would have never dreamed of this slide in the stock's market value. I bought my first 400 shares at $7 and thought I was actually getting a bargain. On the way down I have bought thousands more. Anyone who could have predicted prices falling this low should be very rich right now because there isn't a ratio or managerial move out there that could be used to justify this sort of collapse in value. This is about nothing more than emotion. People are scared. Nevertheless, given my favor for enhancing my position of wealth and financial independence these are the sort of opportunities for investment I need. I intend to go into politics down the road and getting rich seemed like a pretty reasonable endeavor before doing so. After all, I wouldn't want people to think I'm interested in representing them to get rich. |
