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

To: Mike M2 who wrote (82658)	8/2/2000 5:14:04 PM
From: Don Lloyd	Read Replies (2) \| Respond to of 132070

Mike - [... smithers.co.uk ...] Smithers again demonstrates his ability to build complex edifices on crumbly cement. -g- I have an opaque, sealed, cloth bag of marbles. I hire a major accounting firm to count the number of marbles in the bag. It reports a count of 512 marbles. I grant a 25% ownership stake in the bag and its contents to you, Wayne and mb, and retain 25% for myself, in exchange for a promise to not place me on your ignore lists for as long as the thread message count remains in 5 figures. Ignore the associated blackmail threats that would clearly be required to extract such a promise. We have all become concerned that the bull market in marbles has just about run its course, and wish to hedge our exposure by selling covered marble call options. The question for each of us is how many contracts to write without producing an unwanted net short exposure. For such an important question, a new accounting of the bag contents must be arranged. Is there any reason to expect that the count of 512 will have changed due to the change in the distribution of ownership? Clearly the answer is no, but I have seen my ownership position diluted by 75%. Does this imply that the count of the marbles in the bag must be adjusted? Again, no. The point is that the change in my ownership is entirely and completely contained in the ownership structure changes, and is completely unrelated to the accounting of the bag contents. In the same way, when Warren Buffet evaluates a company for purchase, the total price he is willing to pay for the entire company has NO connection to how many shareholders there are, and will not change if the existing shareholders see their stakes diluted tomorrow. The effects of dilution on the existing shareholders are encapsulated in the change in the distribution of shares, and do not affect, and are not affected by, any other accounting item for the company as a whole. Regards, Don