Relevant Post (IP)
Re: Private message sent to me by Mr. Roger Bass.
The reason this post, (and my ensuing two resplies included), are meaningful is because I would like to offer these posts as reference study/standard response to individuals who may post similar baseless attacks/ignorant remarks to those who post here under such light.
Doing so, would save us from having to waste valuable time in responding to the idiots/ignorants.
At the same time, we save the thread from losing quality by avoiding the back and forth volleys of splattering crap that results from those who absolutely have to respond. (myself included, mea culpa, mea culpa; thump, thump).
I also recognize that the "lurkers", possibly a mid-size to large population, could be swayed to negativity by the lack of a proper explanation of the facts, particularly when these facts are not fully disclosed, conveniently ignored, or simply due to stupid lack of knowledge.
For those who need no additional "indoctrination" and are convinced and at peace (no need of Messiahs), with their FTEL investment, then stop wasting time and click the "next" button above.
However, if you need more "gossip", crap and the like, read on. But if you read, pay particular attention to the last 4 paragraphs of my second response.
Here it goes:
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Part One Private Message from: Mr. Roger Bass to: x y zebra.
>>Private Message
>>To: x y zebra (who wrote...)
>>From: Roger Bass Thursday, Feb 19 1998 6:17AM EST
>>XYZ,
>>I was aware that my comments would annoy some people - they were aimed more at those who are hesitating as encouragement to do more research themselves before considering buying FTEL, rather than those like yourself who are convinced, for whatever reasons.
I won't respond to most of your points, but just the one on how the 'transfer' I am talking about happens.
If one individual, X, owns 3M shares out of 10M, with the stock price at $5, they own 30% of the company worth $15M, other shareholders 70%, worth $35M.
In a typical share option scheme (and FTEL is quite normal here), employees get share options with a strike price at the then market value. If X here gets 1M share options at $5, they are worth nothing unless the share price goes up. If the price goes up to $6, and the options are excercised, X has shares worth $24M (after paying $5M to the company to excercise them), others $42M. Everybody has benefited, albeit X disproportionately. So far so good, this is normal.
Now lets take the other case. Suppose X has received $1M salary paid as a note convertible into shares at $1, (below the market rate, as distinct from the options which were at the market rate). Converting these shares *with no increase in the share price* would give X shares worth $20M, others still $35M. However, in this case nothing has happened that actually increases the value of the company, $50M. So, X's share of the value is then $18.2M, others only $31.8. This transaction on its own, effectively transfers $3.2M of value to X from other shareholders. Increases in the share price can mask this effect, but it is nonetheless a straight transfer of value.
The case of FNet is even more blatant. Even in the company's own SEC filings, they feel obliged to point out that this creates a conflict of interest between management and shareholders.
This second kind of transaction is not at all typical for companies in Ftel's position, nor is the inflated, deferred salary, nor is the management direct ownership of a subsidiary.
If you want to post this on the thread, I have no objection, but I'm not posting it there myself. I won't be replying to any further messages from you or others.
Regards, Roger Bass.<<
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Part Two: First Response from: x y zebra to: Mr. Roger Bass.
Private Message
To: Roger Bass (who wrote...)
From: x y zebra Thursday, Feb 19 1998 10:08AM EST
Mr. Bass,
Message acknowledged,
Due to time constraints at this moment, I can not answer in detail, however I will once I am through with what I need to attend now.
However, as a quick "shooting from the hip" answer I will say the following:
First, your private post is a hell of a lot different as opposed to your other 2 posts where you blatantly accused an individual that I have seen for three years work hard, without the intent to defraud as you imply.
Still, you are choosing what you should answer to and what not? Do we live in a vacuum? I fail to see your logic.
I am not afraid to be told that I have made not only a wrong decision, even a stupid one. However, this needs to be proven with facts and in an intelligent debate format.
In addition, you ignore the fact that many of the people invested here are aware of the risk, (risk not only is present, but also, is present in many forms). You come in here stating opinions, (and in the process charging individuals with crimes), as if we are a bunch of babies that have no idea what the hell we are doing.
There are philosophical differences between you and I that are basic. This creates many differences in perceptions. However, this fact does not give you the right to accuse someone of fraud in a public forum, particularly, without facts
You seem to have this air of authority to determine exactly how much should the CEO earn for his effort, and worse, you suggest a limitation without specifically stating, alternatively, what such figure should actually be.
The company and individual involved have disclosed in full what exactly are the mechanics of the proceeds are/will be. The investor/speculator MUST MEET specific requirements of net worth and income in order to qualify for the private placements if he wishes to participate.
Same individuals should be aware of the risks involved and indeed consider what it has been disclosed.
If YOU personally feel uncomfortable with the FULLY DISCLOSED set-up, then you are free to say, "No thanks, I pass".
Again, that is a hell of a lot different than charging someone with a felony.
Exactly who gave you the title of "official Messiah" to come and "save us idiots of our own deeds?
Again, I have no problem with you (or anybody else), coming here and stating his/her opinion and their reasons behind, PROVIDED, they do so in a civil and intelligent basis.
Another big difference that causes a great deal of misunderstanding is the character of penny-stocks.
Penny-stocks are a completely different animal from INTUIT, MICROSOFT, and the like.
This is the world of nascent entrerprenuership; there is a great deal of risk, and only a few make it.
The above is good and bad, it is good because it provides funding that otherwise it would be impossible for small companies to have access to.
It is bad because many will not make it, and indeed there is an open invitation for possible fraud.
The investor/speculator MUST execute a great deal of diligence, caution, and research; even then, he/she takes a tremendous amount of risk.
Risk is indeed another subject that is little understood, people nonetheless, (and unknowingly), do foolish things because their lack of awareness.
You also need to understand the forces of the market what moves it, there are two functions of public stock markets: One to provide funding for corporations, Two: Investment/Speculation forum for the public.
The forces that motivate this true last bastion of Laissez Faire Capitalism are (quite simply), Fear and Greed.
Yet, another philosophical difference is the concept of value.
In your analysis you give for granted how value is accomplished, in order for value to be "stolen"/transferred as you suggest, first has to be CREATED. If value is not created, then it can not be transferred, stolen or given away, simply because it does not exist yet.
Once value has been created, it means, someone created it. You seem to imply that the individual(s) that created do not deserve to be rewarded for their effort, or according to your thinking, should be "limited" to whatever standard you may wish to impose. I fail to understand such philosophy, particularly when I and I alone have made the decision to accept the terms of the "offer" "conditions of the warrants" or whatever the deal may be.
Do not ask me if I want to post your own writings in the Ftel thread, I am not your baby-sitter, you want to post? You do it yourself. The use of a "private message" for the subject you have chosen tells me that you really are not sure of your arguments and all you want is to "say the last word". You can not expect respect, consideration, or deference to you if you make charges the way you have done.
Quite simply, if you make accusations that you are not prepared to support them, why make them in the first place? Again, I fail to understand such logic/philosophy.
In simpler terms, if you can not stand the heat, then get out of the kitchen.
Frankly, I do not care.
As indicated, I will respond to your analysis, later. (As far as the mechanics of the so called "transfer of value" is concerned)
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Part Three. Second response from: x y zebra to: Mr. Roger Bass.
Private Message
To: Roger Bass (who wrote...)
From: x y zebra Friday, Feb 20 1998 1:23PM EST
Mr. Rogers,
As promised I am following up in responding in to your private message, this time in reference to your mechanics of the compensation to FTEL ceo/officers.
First, I would like to review your math. Frankly, I am at a loss in understanding how you are arriving at your numbers, so if you do not mind I will review your own numbers here. If I am wrong, may be you could explain to me as if I was three-year-old, since I do not seem to be "getting it"
So let me try: You said:
>>If one individual, X, owns 3M shares out of 10M, with the stock price at $5, they own 30% of the company worth $15M, other shareholders 70%, worth $35M.<<
Total shares 10 million. Stock Price $5.00 Total value is $50'000,000.00
Officer "X" owns 30%, or 3 million @ $5.00 is $ 15'000,000.00
Shareholders own 70% or 7 million @ $5.00 is $ 35'000,000.00
So far so good.
>>In a typical share option scheme (and FTEL is quite normal here), employees get share options with a strike price at the then market value. If X here gets 1M share options at $5, they are worth nothing unless the share price goes up. If the price goes up to $6, and the options are exercised, X has shares worth $24M (after paying $5M to the company to exercise them), others $42M. Everybody has benefited, albeit X disproportionately. So far so good, this is normal.<<
1 Million shares @ option price $5.00 is $5'000.000.00
1 Million shares @ mrkt. value of $6.00 is $6'000,000.00
Net Profit after paying option price is $1'000,000.00 yes ?
If "X" holds all shares, he has:
Original stake 3 million shares @ $6.00 is $18'000,000.00
Additional stakes 1 million sh. @ $6.00 is $ 6'000,000.00
However, to own this shares free and clear, Officer "X" had to give the company $5'000,000 that go directly to Co.'s coffers.
His net increase in value is 20%, he started with 15'000,000.00 plus a payment to the company of an additional $5'000,000.00, or a total initial stake of $20'000,000.00, and a net profit of $4'000,000.00 = 20%
Shareholders, based on their initial stake of 7 million shares, now the same stake is worth $ 42'000,000.00 or a net return (before taxes) of 20% or
Net profit= (7'000,000.00 x 100)/35'000,000.00= 20%
So far so good, where we differ is why do you consider that the benefit to officer "X" is out of balance since:
1. The creation of value had to be caused by management successful handling of business matters, (excluding possible fraud by "hype" and/or false promotion or stock manipulation).
2. Proper disclosure was made by management at the time shareholders provided the initial capital (assuming this happen during private placement participation). If shares were purchased on the open market, then appropriate disclosures had to be made according to SEC rules. Either way, the investor makes the decision. He is required to do his/her own investigation and make an informed decision.
As far as transfer of value, the 20% net profit had to occurred in the open market since I can not see in your example, what else caused the increased in value of $1.00 per share, other than additional demand from said open market for the stock in question.
And let us not forget, that such profits and transfers of value as you have put this concept, to happen, the shares HAVE TO BE SOLD, otherwise all this figures are, paper profits/transfers.
Such considerations will have to be further studied as to the reasons why the sales took place, (immediate needs for cash or whatever), and further, what are the expectations of future value based on future performance by management.
No fraud here.
In addition, the way you PRESENT your case is quite deceiving since you are implying that officer "X" has a final stake of $24 million, and while you do mention the fact that he did pay the $5 million, you simply do so as a "passing" however you emphasize the $24 million, the net increase in value is 20% for both.
You also failed to mention the fact that such increase in value was caused by management. (at least in FTEL's case).
In FTEL's case, there has been genuine effort and success to create value, and they deserve every penny of said increment, (which by the way as Mr. Peters has explained, there have been only limited sales of his shares. You see Mr. Bass, they are not slaves, but entrepreneurs who deserve to be well compensated.
You also said:
>>Now lets take the other case. Suppose X has received $1M salary paid as a note convertible into shares at $1, (below the market rate, as distinct from the options which were at the market rate). Converting these shares *with no increase in the share price* would give X shares worth $20M, others still $35M. However, in this case nothing has happened that actually increases the value of the company, $50M. So, X's share of the value is then $18.2M, others only $31.8. This transaction on its own, effectively transfers $3.2M of value to X from other shareholders. Increases in the share price can mask this effect, but it is nonetheless a straight transfer of value.<<
Without getting into the math, you are failing to mentioned that the reason that Mr. Peters executed such transactions and conversions was because AT THE TIME, FTEL had not sufficient cash flow, to cover all or part of Mr. Peters salary, in effect this shows you the following:
1. The actual "Transfer of Value" as you continue to put this concept (flawed at best, and deceiving at worst), took place FROM Mr. Peters, to the FTEL shareholders. Why? Because if Mr. Peter's had not done this, FTEL would no longer be in business, in effect Mr. Peters could feasible cause FTEL to be bankrupt by forcing the payment on the notes that he received as compensation. Do not forget that, Mr. Peters waived interest on said notes.
In addition, you are implying that FTEL share price has been a constant $5.00 including the time in which he received/converted the notes for shares. This was not the case, FTEL's price has varied in price from lows (or lower) of $0.60 and up.
2. You fail to see the amount of work AND sheer consistency, tenacity, and belief by Mr. Peters that his work (and that of other's at FTEL) will eventually pay off. This alone has to have a great deal of value by the dedication and complete commitment to success shown by DEEDS not FALSE promotion and fraud as you and others seem to be implying (in fact, actually expressing so).
You also continue to imply that the investor never considered any of the above, you indicate at the beginning of your message as follows:
>>I was aware that my comments would annoy some people - they were aimed more at those who are hesitating as encouragement to do more research themselves before considering buying FTEL, rather than those like yourself who are convinced, for whatever reasons.<<
"Hesitating as encouragement to do more research themselves" ?
If you really want to add to a valid and fair analysis, you should be more accurate in your statements and not be as deceiving as you show, in fact it seems to be your intent. Why? read the very first part of your own statement, above.
I have given you valid reasons why I am convinced in the success of this company.
It is true that Mr. Peters, the FTEL officers, every worker there, all other investors, and I could be dead wrong. That is part of the accepted risk.
>>The case of FNet is even more blatant. Even in the company's own SEC filings, they feel obliged to point out that this creates a conflict of interest between management and shareholders.<<
The conflict of interest I believe, refers to the fact that FTEL will be benefited by the fact that Fnet is forced to buy equipment from FTEL. However, for such event to happen, represents a complete success of the original business plan. FNET would never exist in the first place if FTEL had not developed the technology in the first place!! Hardly a "conflict".
As for transfers of value? Again, you are as wrong as the entire Communist philosophy, as it has been well documented.
You seem to identify with such philosophy, since their entire premise was to "re-distribute wealth", no consideration as to who created wealth in the first place. Total control of the means of production by the state. Of course, without the basic know-how of what it takes to create value/wealth. No understanding of the process of wealth creation, motivation to do so and concept of the "right to private ownership" of property.
Your statement "transfer of value" per se, means nothing. You do not provide any explanation as to who created the value, what motivation was used to create it, what was involved in creating such value, (cost, intellectual property etc), who owns it now, and under what terms such transfer took place.
How can you say that there is a "Transfer of Value", without fully explaining what you mean? ( Value, Mr. Bass HAS TO BE CREATED FIRST. SOMEBODY had to create it. Such "somebody" chooses to be compensated. Under what premise do you, Mr. Bass, have the right to tell us, the ones taking the risk, (who have calculated it already), what the "proper" compensation should be for Mr. Peters and others at Franklin.
Value, once it is created, belongs to whomever created it, then the owner can do the following with it: it can be sold, bought "transferred for valuable consideration", even STOLEN.
HOWEVER, IT HAS TO BE CREATED FIRST. And it belongs to the creator of said value, he/she is free to do what he /she will with it. So long so the rightful owner of the value created, acts within the law, you, or anyone else can not publicly accuse said owner of fraud, without proving it.
Without the creativity of the FTEL engineers, FTEL shares are no more than nice wallpaper
Above all, Mr. Bass, I can not find in your three posts (2 public, and one to me directly), any shred of evidence of intent to defraud by Mr. Peters
>>This second kind of transaction is not at all typical for companies in Ftel's position, nor is the inflated, deferred salary, nor is the management direct ownership of a subsidiary.<<
You have absolutely no leg to stand on this, since you do not explain at all the validity of your statement, what are the facts that you are basing such statement?
In short, I stand by my original response, In your private message you have proven absolutely nothing new, indeed you have re-inforced your first and second posts. These are full of false accusation and deceiving statements, both based on, flawed analysis, ignorance, ill intent, or indeed all three.
In my first response to you I told you that although you had given me authorization to publicly publish your post, I was not going to do it, since it was up to you to do so.
I will change my mind since in closer scrutiny of your post, I find that your attacks and statements are similar to others that have been made in the past by others with similar intentions and or lack of knowledge.
I will publish your posts, along with my response. Not so much as a "response", but more as an explanation of facts to others that may be swayed by posts like yours to view the actions of FTEL and that of its officers under a negative light as you imply.
And to those who defend your posts under the premise of freedom of expression protected by the first amendment, saying "he has the right to his opinion", I say the following:
Yes, everyone has the right to his/her opinion, but no one has the right to change, hide, or lie about, the facts.
Facts are facts, not what someone wants them to be.
Full and truthful disclosure, the right to own property, and the right to just compensation are equally (if not more), important than the right to freely express oneself. Particularly if such expression is a basket of Bladderblah, (see definition).
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So there you have it, a big weight is off my shoulders... Finally I could not contain it any more... oh noooooooo! |
