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

To: Michael Bakunin who wrote (76444)	2/23/2000 3:08:00 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 132070

mb - [[...MSFT owes people shares. How you value those obligations is a matter of judgement.]] I think Bill P's error is that he doesn't take his certificate copy machine seriously. Assume that Bill Gates' kid is 5 years old and gets a computer and Xerox color copy machine for his(?) 5th birthday. Every day when he's supposed to be taking a nap he pulls out a 100 share MSFT certificate and makes a perfect copy with proper sequence numbers and then gets on his computer and hacks the transfer agent's database to validate his copy. He then returns the original certificate and hides his copy with the copies made on previous days. This continues until he is 6 and he starts taking the bus to public school. He forgets about the copies until he is 18 and is cleaning his room before going off to college (UNLV) on a football scholarship. As he leaves the mansion, he leaves the stack of certificates just inside the reinforced blast-proof door for his father to handle when he comes home from playing bridge with Warren Buffett. When Bill finds the certificates, he arranges to donate them to the Fund for Time-Dilated Returning Spacemen and contacts his tax lawyer, to take charitable deductions that are of the order of 5 years of world gross global product. Since these certificates have been absolutely secret over their entire life, they have had exactly zero effect on MSFT, the company, or its operations. Now that they are known, their entire effect is to dilute current shareholders' ownership and to produce a charitable contribution to the receiving fund. There is still no effect on MSFT, the company. If they had not been secret over all that time, the only difference would have been to dilute the shareholders at a different point in time. Over the time in which they were secret, there was no possibility of them being bought back. The creation of new shares by a company has no real cash cost to the company. It has a real dilution effect to the existing shareholders and would have a tendency to reduce the market value of the company to a non-owner to the extent that dilution is expected to accumulate at a given rate. Regards, Don