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.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: cfimx who wrote (7175)	5/17/1999 2:13:00 PM
From: jeffbas	Read Replies (2) \| Respond to of 78464

NO! Basic Buffett would be that you do not load up a cyclical company so that debt equals four times equity. My point about using stock was from that perspective. We now have a company that might not survive a serious world wide recession. In my opinion, NH should have offered 2 1/2 shares of stock for 1 and sold CSE that the synergies at that price would have caused both stocks to rise dramatically. THAT is a Buffett deal that makes sense for the balance sheet and both companies' shareholders. Had that been done, CSE might now be the same price and NH several points higher. What was done was just stupid and reflects the conflict of interest Fiat has versus NH shareholders in not wanting to give up contol. This reminds me of a true story. Mutual Benefit Life was a large old line mutual insurance company of excellent stature. In the 80's they loaded up their balance sheet with real estate that in the ensuing real estate depression caused the company to go out of business. In effect they ran their business ignoring the low probability "tail" of a really adverse environment. Similar situation here. As far as stock prices go, your point is well taken. However, these are highly analyzed institutional stocks. While the absolute values change with the market prices over time, I really do believe that going outside historical price relationships is asking for trouble. Note the study that was referred to on this thread last week that most premiums paid never are justified by the synergies achieved.