"Perhaps it is best to never go public at all and keep a majority stake of the company you founded"
agree. going public makes your company become the object of exploitation. Those wall street guys are doing a really nasty job.
The price that something is worth is not what you can come up with in some spreadsheet, but rather the price that someone will pay for it. That was a hard lesson for Southeastern Asset Management (SAM) to learn when it heavily invested in Sun Microsystems before it was ultimately sold to Oracle, and this could turn out to be …
I'm writing this on a pc, in an office that uses hundreds of the things. Home PC sales may tank, except amongst gamers but those that predict the end of PC's in the workplace are deluded.
Yes mobile is growing, but mobile is how we play or seek distraction, it isn't how we do work.
Really, just waiting for someone to go Seussian here. It's gotta happen. And while I'm here, uh, why doesn't SAM just sell off here while the price is nice. I just don't get it. Then again, I don't understand the concept of money very well. Coinage: No problem. The abstract concept of money: Big problem. As in "My string of semi-random bits is equivalent to such and such gazillion dollars/pounds/euros/whatever" just really makes little sense. But that is how it works these days.
This reminds me of the Manchester United situation. The company was vastly undervalued by the stock market (which didn't understand it), and so the Glazers were able to buy it for a song, and invest almost none of their own money. While ending up owning all of it, after paying off the debts with the company's money. Except that due to their inability to get cheap enough credit they've struggled to make the deal work, but I suspect they'll make out with the moolah in the end.
There are only two real reasons to do a buyout like this. Either you've got a cunning plan Mr Blackadder to do something different, and thus make an enormous profit, which you obviously want to keep more of. Or the shares are going cheap, cheap, cheap - and you want to grab it while you can.
The problem is that the board, and Michael Dell, are going to look bloody silly if the shareholders torpedo the LBO and it all falls apart. Which means that Southwestern are in a bind, because the share price isn't likely to go up if the deal falls apart. So I guess the only answer is to put their money where their mouth is. If the company is only worth half the stated share price, then get buying. Or stop whining.
It does seem a bit odd that a company can use its own money to allow its management to buy it though. Makes it harder for any rival to be able to buy it, because they've got to cover extra money that the management buyout are getting from the piggy-bank. The advantage being that they'll actually have some working capital, whereas the management buyout seems to be spending all the working capital to buy back shares, and borrowing more from the banks.
Dell's announcement of wanting to buy back shares at $14, has one main result - the stock price stabilizes at $14 instead of continuing the drop with the reduced sales. The banks will then give loans on that valuation of Dell - which means the stockholders get more money than if they let the stock slide on down.
That SAM for want more $ per share, is understandable, they probably paid premium. If the banks can be convinced to cough up more money for Dell, stockholders will be pleased.