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Where is the market cap graphs?

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August 06, 2011 – Comments (2) | RELATED TICKERS: MGA

I have been having a more detailed look at the market then I have in a few years in that I am actually taking some time to look at some financial reports.

So, I am looking at Magna International.   I was asked to have a look because of this story, http://business.financialpost.com/2011/08/05/magna-earnings-disappoint/.

I disagree with how stock options are accounted for as I don't think it gives a good to picture to investors as to what those stock options are doing to the company.  Anyway, I was looking through this one and this is what got my attention, the increase in shares from 2010 to 2011:

 

'Basic 240.9 224.3 + 7%

Diluted 244.8 226.8 + 8%

Diluted earnings per share decreased $0.15 to $1.15 for the second quarter of 2011 compared to $1.30 for the second quarter of 2010. Excluding the unusual items discussed in the "Unusual Items" section, diluted earnings per share decreased $0.28 from the second quarter of 2010 as a result of the decrease in net income (excluding unusual items), described above, and by an increase in the weighted average number of diluted shares outstanding during the quarter.

The increase in the weighted average number of diluted shares outstanding was primarily due to the net issue of Common Shares during 2010 related to the Arrangement, the issue of Common Shares related to the exercise of stock options and an increase in the number of diluted shares associated with stock options, partially offset by the effect of the repurchase and cancellation of Common Shares pursuant to our normal course issuer bid."

 

I did a calcuation on the increase of dilute shares and I calculated a one year increase of 7.35%. And in the explanation that follows the dilution was for stock options, which were partially offset by the effect of repurchases. 

So, my first instinct reading that, "ARE YOU KIDDING ME!  7.35% AND IT WAS ACTUALLY MORE BECAUSE THERE WERE REPURCHASES!!!!"

This is a GLOBAL company, operating everywhere in the WORLD and essentially because of dilution investors who bought and held now own about 1/14th less of the company then they owned a year ago.

I would like to see it be required that there be a market cap graph with ALL potential dilution priced at the current share price and every time there is a dilution, the graph actually shows the jump in the market cap, and a market cap graph without the dilutions.

These stock options are so sticking it to investors and I simply don't think the reporting is screaming that to investors the way it ought to. 

Ok, I believe I found the repurchases and they were minor compared to the stock options, but still these stock options are terrible for investors.

2 Comments – Post Your Own

#1) On August 06, 2011 at 3:32 PM, truthisntstupid (81.04) wrote:

http://caps.fool.com/Blogs/disappearing-buybacks/317600

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#2) On August 06, 2011 at 9:22 PM, dwot (42.57) wrote:

Yeah, I know truth.  Before I went north I covered a class where the teacher had the students playing the stock market and these were super keen students.  That was probably one of my favorite classes to cover ever.  I think one kid had more then doubled his portfolio in about 6 weeks.  I checked what he was doing and he had borrowed either 100 or 200%, I forget how much he'd been allowed to borrow, and he had everything in a single position.  We had a bit of a conversation about risk management, and that some companies that are low are perhaps on their way out.  But, I was able to show them how they could look at the number of share and to look for share dilution and just a whole bunch of stuff.  

I tried to show my students the market and investing and they didn't take to it even a little. 

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