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Strategies & Market Trends : Value Investing

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To: TimbaBear who wrote (15027)	8/2/2002 12:49:47 PM
From: Don Earl	Read Replies (2) of 78515

Timba, Interesting analysis. It almost looks like the issue is one of expensing stock buy backs as a current operating expense rather than one of expensing options as wages. The worst part about GAAP is it makes it fantastically difficult to tell where the money goes and there's no uniform treatment from company to company. If a company issues a few shares of new stock to control cash burn, it's not the same as spending $50 a share in the open market to issue as compensation. If nothing else, I'd think insider trading regulations should apply to the transactions. I've seen a lot of cases where a company will announce buy backs while insiders are exercising options and dumping the stock in the open market. At the very least the six month rule should apply. If the company is buying, insiders should be prohibited from selling for six months. I think there are times when buy backs make some sense. For example, when a company is debt free and has a lot of cash at the bottom of the chart. But I don't think insiders should be allowed to use shareholder assets to make a market for their personal sales.

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