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Pastimes : Starbucks SBUX

SBUX 91.69

-0.3%

Feb 2 3:59 PM EST

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To: Ken Berkun who wrote (75)	8/27/1996 10:53:00 PM
From: Sturgeon	of 148

Ken, You say "management is very good at growth". How? If they had to finance internally they would grow at 10%. Show me how I'm wrong. Please. Their growth is not because of management, marketing, brand name, coffee, etc. The only cause of 40% growth is the high stock price and the constant selling of new shares. New investors PRODUCE the growth not management! Do you realize this??? Does anybody??? Think about this. If the p/e were 15, no matter what "the great management" did earnings per share growth could not exceed 10%. It would be impossible. Starbucks CAN'T grow with a lower stock price. Show me I'm wrong! Somebody! Please! Doesn't it seem weird that a company's growth rate and hence its value is determined by how expensive its stock is? Doesn't this raise questions in your mind? This is exactly the same as if I offered people 40% interest on their money. I pay the first group of investors 40% interest using money from the next group. And on and on..... that's a pyramid scheme. And that is exactly what is happening here. By themselves Starbucks can't produce the 40% growth investors expect. It's absolutely impossible. By issuing new shares at high prices every year to ever larger numbers of investors, the company MANUFACTURES the growth! They don't even have to use the money to start new coffee shops. They could buy Bonds. It makes no difference! The coffee is irrelevant. Think about this. If Starbucks used the money they raised from issuing shares to buy bonds they could produce a 40% growth rate, forever! Does that make sense? A company that does nothing but buy bonds grows at 40% per year? Is something wrong with the natural laws of the universe? Wouldn't I be an idiot if I didn't think something was wrong with this company? I figure there are intelligent people on this thread. I am making a tremendously important point. How come nobody will debate this instead of brushing it off? Are you having a hard time understanding? Tell me what part you don't understand! If you all think I'm wrong, show me how.

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