Investor "Demands" Palm Raise Stock Price
from the secrets-of-savvy-investors dept
The third-largest shareholder in Palm is demanding the company take steps to raise the price of its shares, apparently believing Palm's management can snap their fingers and make the investment pay off. While the company could do something like a buyback program or put itself up for sale, it really doesn't have much control over its share price, and can't help the fact that its price-to-earnings ratio is half that of Research In Motion. However, though, in the interest of securing college funding for my as yet unborn children, I demand that all the companies I invest in raise their share price. Right now.
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Sweet
Dear Bill Gates,
I need a new house and I'd like to retire. Can you please raise the price of your stock to 1 million dollars?
I'll be looking forward to being richer then you in about 10 minutes.
Thanks!
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Re: Sweet
i hate to nitpick a joking post, but i had to point it out
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No Subject Given
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"Price"
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No Subject Given
Wow. Where to begin.
Well, imagine that you owned a mom-and-pop grocery company and you hired employees to work for you, but they didn't really work all that hard, and you didn't make much money because they wouldn't even talk to you about how you could all make more money.
Say the floors were always dirty, and the employees refused to replace the lightbulbs or keep the shelves nicely stocked. This, obviously, would impact the companies profits, since these activities would tend to keep customers from returning.
That's what's happened here. This shareholder is the largest owner of the company. He invests in the company, which allows the managers of the company to have jobs. They, in return for a paycheck, are supposed to produce a profit for the owner. That is their sole function. To produce his profit. He gives them jobs and regular paychecks and they give him the profits. That's the bargain we make.
This owner is not satisfied that his employees have done a good job, and is demanding they do a better job, or else he will sell the company and they will be out of jobs.
It's just done on a larger scale than in a mom-and-pop business.
But it is essentially exactly the same thing.
So there's nothing odd about a large shareholder "demanding" that things be done which would cause the company to become more valuable, thus, increasing the stock price (such as spending accured profits to repurchase stock, thus making it worth more per share.)
In fact, it's not done often enough. More often than not, management "spends" those profits on higher salaries and ridiculous perks for themselves, such as corporate jets and $60,000 shower curtains in their executive bathrooms. Think Tyco.
They do this rather than handing the profits over to the owners of the company that it rightfully belongs to.
You should be lauding this shareholder. He definitely understands more about running a business than perhaps you do.
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thank you
nice post.
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Re: thank you
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Re: No Subject Given
Every company is obviously trying to "raise its share price," so having some moronic investor say it publicly doesn't help matters. It just makes him look stupid and greedy. Of course the company should do what it can to raise its value. Having an investor say they should doesn't help at all. It just makes him look like he doesn't know how the stock market works, and he can miraculously demand a stock increase.
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Re: No Subject Given
How exactly, is the owner of the company "stupid and greedy" for wanting his company to be worth more tomorrow than it is today? What other motive could he have that would cause him to invest his money in the company, providing jobs for the employees and a product for the public?
You call this person "some moronic investor" as if he isn't the OWNER OF THE COMPANY, but some bystander just causing trouble by being greedy.
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Re: No Subject Given
It's simple. EVERYONE who invests in a company wants the company to be worth more. Why do you think this guy deserves some special attention for wanting it to be worth more.
What makes him look stupid and greedy is the fact that he's suddenly demanding it be worth more as if the company can just snap their fingers. Can you understand the difference? Of course everyone wants their investments to be worth more. What makes him look moronic is that he's *demanding* it.
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Re: No Subject Given
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No Subject Given
"planned to deliver a letter to management outlining the actions the company should take."
The article is not specific about the nature of those actions. It could be they are displeased with their strategic efforts, that they believe their cash should be dividended back to shareholders, or that management is taking huge bonuses relative to their performance. A specific letter like this along these lines were shareholder complaints when MCI accepted a much lower bid from Verizon than Qwest. I think MCI was solidly wrong to accept a lower bid, and there was a clear remedy to a higher stock price (accept the Qwest bid).
Any of those are entirely legitimate complaints. Management works for shareholders (via the board of directors). To the extent that bad managements can supress a stock's price (for example by having a record of bad judgement, poor accounting, etc) it is entirely within any shareholders' right to complain and ask that those problems be fixed.
It really depends a lot on the nature of the letter, which isn't clear from the article. Blockbuster (according to their largest shareholder, Carl Icahn) turned down a buyout offer in the low teens (versus a stock price of $4 or so now). TO date Icahn has lost hundreds of millions of dollars due to that decision. I think he has every right to complain that management has not acted in shareholder's best interests (which is basically their job) and to start tossing them out (which has already started and will probably finish next year).
If anything, I think shareholders are too passive rather than too aggressive.
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It doesn't say he wants them to just raise the price of the shares. It says he demands them to "take the steps to raise the price" which could mean many things.
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Greedy?
Why own something as an investment? To make a profit. And if you own a stock you can profit in only two (or three ways if you look at the taxe write-offs you can make from time to time) ways:
Dividents or getting a higher valuation of the stock.
Give me the argument that will win my heart: If the company isn't willing to pay dividents (as an example) then why shouldn't the owner (investor) ask the company to try to raise the company valuation a little bit? It is just common sense. Why hold it otherwise?
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