Cashing Out Options for Share Buy Backs
November 28, 2007
– Comments (8) |
RELATED TICKERS: BHP
I have consistently been disgusted by what I see in financial reports as directors consistently do what's best for their pocket at the gross expense of the shareholders. The silence and continued support of shareholders of these stocks with executives robbing astounds me.
I think history will show that stock options for directors and share buy backs will be found to be the single largest events of their era to transfer, or steal, wealth from the average investor to corporate executives, the stuff of Richistan events.
I have looked a numerous financial reports where companies have borrowed money to buy back shares, shares that are already priced high. What is tragic is many investors have cheer for the buy back programs and the share price is supported to a new level during the buy back, yet if you read the reports, by the time the executives have sold out their options, the total number of shares outstanding remain almost the same. At first when I saw them I simply though they were dumb, as with BHP, but I now see them as simply lining the director's pockets, a legal form of theft.
DELL comes to mind as a company that if you dig into their financial reports they've been doing buy backs, but the share count has hardly declined due to the paying out of options. The earnings have essentially been paid to the executives though the stock options.
I was just reading Mish's blog and he's made a squandered money list of companies that are now issuing enormous equity because of their liquidity problem that bought back shares for enormous prices.
My position is that many more companies belong on that list, and they don't all necessarily have liquidity problems, but the executives have taken much of the wealth and left a shell.
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