Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Michael Bakunin who wrote (76363)	2/21/2000 7:27:00 PM
From: Don Lloyd	Respond to of 132070

mb - [[You're probably tired of hearing from me (I would be), so I'll keep it short. An unhedged ESOP is a liability. WB would have analyzed the cost of retiring the ESOP and replacing it with a cash bonus plan, which is his pattern....]] Not at all. At the very least your responses indicate that you haven't yet added me to your ignore list, but if I don't start cutting back on my posts, I'll have to add myself to my ignore list. -g- [[...When WB hears his target's plan has been retired, he'd change his valuation by the difference between $100 million and the previously calculated cost of retiring the plan. When he hears about the 10% salary boost, he'd adjust based on the difference between the expense of the cash bonus plan he'd modelled and the 10% raise...] This sounds right to me, but I don't feel that it invalidates my point. My fundamental claim is that ownership structure and share distribution is completely irrelevant to the business valuation of a company by a non-owner. This implies that any secondary offering that produces positive cash increases that valuation, independent of terms. In that any option grant program can be modelled as a secondary offering plus additional company benefits, (salary reductions and tax deductions), the option grant program must also be positive. The potential negative effects all accrue to the existing shareholders and at some point offset the positive effects. Secondarily, any stock buyback that uses cash will reduce the company valuation for the non-owner. For the existing shareholder the net effect depends on whether 50% of the company is bought back for $1 or whether 1% of the company is bought back for $1 billion, or something in between. Regards, Don All of the forgoing relates to a company being taken private. I believe that a public company will always have a larger theoretical value, just as almost any product will be worth more if there is a large and liquid market that is able to access the most motivated potential buyers.