The Next MicroSoft!!!!
That's the usual claim made about some penny stock trash that someone is touting on the message boards and is one of my pet peeves. When I investigate the stock it is invariably some POS with no income but a steady stream of happy hopeful press releases. The SEC filing usually reveal that the company pays for everything, including the office furniture, with vast quantities of stock issued below market and the accounting firm has put 'going concern' language in the report that reads something like this. "The Company, however, has no firm commitments from any party to provide it additional funding. Without some source of additional funds, it is unlikely the Company will have sufficient funds to continue operations for the next twelve months." When I point this out, the invariable response is, "Aww Dennis, nobody ever reads the 10QSB's, you probably wouldn't have bought Microsoft when it was a struggling penny stock!" This is followed up by a link to a long term chart showing Microsoft trading for $0.09 or $0.10 in 1986.
MicroSoft was never a penny stock! What the tout has failed to mention is that as a result of the 9 stock splits since Microsoft went public, every share that traded in 1986 has become 288 shares. MircoSoft went public at $21 a share March 13, 1986 and has never traded lower! Microsoft Investor Relations maintains an Microsoft® Excel spreadsheet (668Kb) of daily closing stock prices since the initial public offering on March 13, 1986. Not only will you see the price adjusted for all 9 stock splits , but you will also see the price unadjusted. Down load from here microsoft.com and see for yourself. And this blog recounts what really went on around MicroSofts IPO. corplawblog.com MicroSoft wasn't no penny Pink Sheeter hyped by some investment tipsheet. See this reprint of the June 21, 1986 article, "Inside the Deal that Made Bill Gates $350,000,000"
unf.edu
So what characteristics would a stock need to prossess to be the 'Next MicroSoft'?
1.) Go public around $20 not $0.02
2.) Be absurdly profitable for years prior to going public and in no need of money,
3.) Be dominant in ones market niche with a monopoly like Microsoft or have an unassailable intellectual property position like Qualcomm.
4.) Go public for reasons other than a desperate need for money, such as legal, founder estate planning. etc.
So the next time you see someone tout some POS as the Next MicroSoft, remind him what the real MicroSoft was like when it went public.
Just something I wanted to get off my chest and to have the arguements archived here the next time I need them. |
