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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: Skeeter Bug who wrote (16400)8/5/2002 3:08:22 PM
From: Don Lloyd  Read Replies (1) of 42834
 
SB,

You didn't pay any attention to my discussion of the (non)significance of writing yourself an IOU. Stock that a company owns itself is in a peculiar state of existence and is equally meaningless until it is given away or sold.

If a company prints up stock certificates for 10% of the previously existing shares of the company, the certificates are merely owned by the shareholders along with everything else the company possesses. The shareholders still own 100% of the company. If the certificates are distributed to the shareholders as a stock dividend, or a partial stock split, all of the shareholders will nominally hold 10% more shares, but still will own collectively 100% of the company, which now has a lower split-adjusted per share stock price, but nothing of economic significance has happened for anyone.

Nothing the shareholders do with their shares falls within the purview of company accounting. If they give some of their shares to their brothers-in-law, no one cares. If the brothers-in-law happen to be company employees, there is still no accounting involvement. Every possible distribution of shares to employees as compensation can be exactly duplicated by an appropriate transfer of split shares directly from shareholders to employees. If accounting attempts to come up with substantively different treatments of events that start and end in identical states, then it is guilty of the error of arbitrariness.

Regards, Don
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