Personal Strategy for Shareholders' Meeting: Watching the Board
Hi, Everyone,
I think there are two basic types of insight we can get out of this meeting. One type of insight will come from any new information that they may volunteer, or that might be squeezed out of them. I do not expect much new information to be forthcoming, however. Valence is a secretive company within a secretive industry, and apparently Lev is determined to keep it that way (and on the whole, I cannot disagree). On the other hand, I gather he can be responsive to specific questions, and I expect many questions, specific and general, will come his way. The second type of insight we can get out of this meeting will come from observing the reactions of the other board members to the questions, and to his responses. I plan to watch the board members for any sign that a question surprises them, and for any sign that Lev's response surprises them.
This strategy comes out of the realization that, in the end, we either do or do not trust the judgement of the board regarding Lev and Valence, and that in turn means we either do or do not trust that the board is competent, well-informed, and engaged. The information we have, and are likely to get, can carry us only so far. We can have a certain amount of hard data, and we can make various inferences from the data that range from near certainty to highly speculative. But the aggregate of data and inferences is almost inevitably so thin that ultimately we cannot base an investment decision solely on its contents, if we are to hold the stock on more than a hunch and a prayer. If we are to hold the stock despite this paucity of "objective" information, we must have confidence in the people running the show -- the management and the board. We must have confidence that they are better informed than we are, and that they are confident that the company is being led by competent management according to a plausible plan.
As I have said before, I think Valence has an excellent board -- almost a dream board. No 25 year old billionaires among them. Each has been around the track a few times, each has a history of significant achievement, each has personal interests and incentives dependent on Valence's success, and each has demonstrated his confidence in Valence with recent purchases of its stock. Now the question is whether they have been reasonable in placing their confidence in Lev and his approach. At the meeting, I expect a range of questions which will elict their reactions. What I will be watching for are the signs that they are informed and engaged in the affairs of Valence, are confident in Lev's management, and are confident that there is nothing they or Lev have overlooked. If I can feel that they are confident in Lev and Valence, and that their confidence is well-founded because they have been diligent as directors, then I will rest easy despite the lack of information.
I will report my initial reactions Friday night or Saturday morning. I will be gone for the rest of the weekend, though, so a more reflective report will have to wait until Monday. And now, to pack and head for the airport. The donuts await.
Regards, lws
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