CB -
I know we argued about this in the past, but don't remember how it resolved. How do you address the issue raised in the Barron's article, ...
When two companies exchange stock, the market value placed on each is essentially an arbitrary number, important to holders who want to liquidate their holdings, but a poor basis upon which to do accounting. In an unforseeable future, hindsight will reveal what the value of the companies had been, but accounting for a mixture of cash and stock in the present is fraught with error. If a company expends cash, there is a known quantity of damage to the shareholders. If a company receives cash, there is a known benefit to the shareholders. If, on the other hand, a company expends or receives shares, the effect on shareholders is known by its dilutive or antidilutive ownership result, and not by an arbitrary number of dollars assigned a certain number of shares. This is not really an answer to the question, but more a question of whether the question has an answer. When the market value of a stock drops 50% in a day, there is no requirement for an accounting transaction.
Regards, Don |
