I believe that both David and Brian are right, depending on the specific company and circumstances. We buy an item because we believe we are getting fair or better value for that item; similarly, the seller also agrees with us. Can we both be right, simulataneously? Maybe, but probably not.
Now, apply this basic interaction of supply and demand. When a company says they won't BUY their stock back, like Billy and Paul said about Mr. Softee not long ago, what are they saying? They are saying that, at current prices, their stock is too expensive.
When Mr. Pian says he wants to take King Cash to retire shares, he is saying, IHHO, that SETO is cheap and he will part with dollars to reduce under priced shares. Now, and listen carefully David, if he can similarly find an acquisition that he believes can grow and whose seller also feels SETO is underpriced, then he can get that acquisition for shares. If both parties meet at an agreeable amount, voila!, a deal.
There is no contradiction here. If Mr. Pian cannot find a seller who believes in the worth of SETO, yet Mr. Pian still likes said acquisition, THEN Mr Pian will use King Cash; however, if Mr. Pian is able to finesse and sell the future value of SETO to a prospective seller, then that seller will take the shares. ( Besides, even if the seller liked SETO but wanted the cash, he may be unable to get the equivalent number of shares on the open market if he had to go out and buy them) . Even if he thinks SETO is worth $3 per share, he will pay by the method necessary to make the deal work.
David is right in the sense that using shares could be dilutive, but it is also highly dependent on what is being acquired. Some deals you get with dollars, assuming you have them; others, you get with shares. Whether you use $ or shares, if the thing you're acquiring is value-less then either method is the wrong one.
TG
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