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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (64783)	9/20/2003 6:56:46 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 77400

Lizzie, this whole Google IPO discussion was started by you in the midst of an argument about expensing of stock options, in which I was a participant long before the topic became de-rigeur. I disagree with you that the IPO of companies like Google will be halted in their tracks. Not because I don't think the financials will be less than rosy, but because I know the purpose that these public offerings serve, and who they serve. It's almost as if you are arguing "If wages were expensed then IPOs would be impossible". There are companies that IPO in the red. In fact, in days gone by, the IPO game was a balance between insider exit and attraction of capital necessary to get over the hump. Most companies operated in the red even after IPO. Look at Amazon, for example. Its IPO occurred when it was deeply in the red. People didn't buy into the idea that one could sell books below cost indefinately. People looked to the monopolistic franchise such a strategy could purchase. Even without expensing for stock options. I think that if you made your points in a less "henny penny the sky is falling" kind of way that the truthful substance would be more open to discussion. My objection is not to some of the substance, but to the conclusion. As far as differences of opinion on the options expensing thing, I have discovered that most of the people who are against it seem to throw up a fog of disconnected and fallacious arguments more designed to protect the status quo (I've debunked about six so far in the last week on this thread, several by the same person). And most of these fall back on the single pillar that is this: if options were expensed then our companies would look worse. Yes, and if makeup was banned... ... but just as makeup doesn't change the person underneath, accounting doesn't change the company. Just changes how it looks. This is the truth of it. Companies appear to be generating wealth for their shareholders at a faster rate than is actually occurring. The reason is that they are indulging in dilutive equity financing. Wearing corporate lipstick. By reporting the proximal cause of dilutive equity financing as an employment cost (for this is what it is), then the rate at which shareholders are being made wealthy by the company actions is reflected in EPS. Which is what it is supposed to represent. We don't buy companies based on their current EPS (if so, we would be paying a lot less for Cisco). We buy companies based on what we think the future EPS will be. So if Google or any other company shows a path from low or negative EPS to positive EPS then it will be a candidate for investment of public money. IPOs will continue.