[ale] OT: corporate finance 101

Chris Fowler cfowler at outpostsentinel.com
Mon Jan 21 20:49:25 EST 2002


Many reasons.  I've worked for a few public companies and can say never in
my life have I learned to scam like those guys.  I have a saying.

When you are a child you believe money grows on tress.
You grow up and realize that is false.
Then, you work for a public company.  You know somewhere there
must be a damn tree with money growing on it!

This is especially true for companies who have little sales.

How do they do this.  Easy, fools that want to invest.  If you had a crazy
brother that wanted to star his company you would give him say $100.00.  He
would ask for $100.00 each week.  Sometime you ask. "When am I going to get
my return?"
When investors ask this, it is time to find another fool.

Stock Prices.  These could be used for many things.  Lets say you had $0 in
the bank and you wanted to buy another company.  You in agreement with that
company decide to give them 100,000 shares at a value of $40 per share.
Before the deal is closed the price goes to $20.  Now you have to fork over
200,000 shares.  Or maybe the deal goes null and void.  I believe that stock
is good for the economy but so many companies fail in 3 areas.

1.  Management
2.  Innovation
3.  Sales

I believe they can fall in that order but someone correct me or add to the
list.  When you are public your books become public knowledge.  When sales
fall you it reflects in your quarterly statements.  Read some of a failing
company.  Read the press releases you can sense the death or failure.
Basically 2 and 3 are a bad cycle.  Without innovation no one buys.  Without
sales you can't pay development costs.  You then spiral like a plane out of
control until you crash.  So you try to recover.  You do the following.

1.  Fire Management
2.  Hire New

You Hire New to pump faith into investors on the future of the company.

3. Recruit investors
4. Pump out press releases that fluff your company

This will continue until you pull out of a spin or hit the ground.  Problem
is there are fools wiling to invest.  Too many fools.  It is a slow and
painful death for you and your employees but the company somehow manages to
go on.  This is the way it is with many public companies that are in this
environment.

How do you fix it?  SCAM!

Find any rule you can get around or break that makes those quarterly reports
look good.  Hint,  reports are due 45 days after end of quarter.  If you
invested in a company that released theirs on that last day they can only be
2 reasons.

1.  Laziness (Unlikely)
2.  Loss of $$$

If a report looks good the faster it is released the better the stock price.
You can basically be loosing money but if you can keep the price up, you can
get investments.  Oh yea,  keep the business plans pumping out of the works.
Create
a new for each loss of investor.  If you like drama, become an office in a
public company that is a failure.

Sometimes a company can't get investments.  If the price is too low they
have to pump out major amounts of sales to pay bills, pay salaries.  Every
time they do this it can dilute the shares owned by shareholders.  Not a
nice thing.

Feed on this.  You need 2 elements to break rules or laws.

1.  Opportunity
2.  Time

How to become a .com billionaire.

1.  Find a dumb investor
2.  Build a pseudo company
3.  Market the hell out of vaporware
4.  IPO
5.  Wait till you bloackout time is over
6.  Sell your stock or live a nice lifestyle
7.  Bankrupt the company

Many did the above correctly.  It was too late for LinuxOne.


Enron had both.


-----Original Message-----
From: James P. Kinney III [mailto:jkinney at localnetsolutions.com]
To: ale at ale.org
Sent: Monday, January 21, 2002 8:29 PM
To: Atlanta Linux User Group (E-mail)
Subject: [ale] OT: corporate finance 101


Why do companies panic when their stock price falls? They are not the
ones selling it. Unless they are in IPO, or have a new release. The
stock buyer pays the stock seller. The only time the company gets the
money is when they are selling. Someone please enlighten me as it makes
no sense.

I've been reading on the Enron mess and it stinks.
--
James P. Kinney III   \Changing the mobile computing world/
President and COO      \          one Linux user         /
Local Net Solutions,LLC \           at a time.          /
770-493-8244             \.___________________________./

GPG ID: 829C6CA7 James P. Kinney III (M.S. Physics)
<jkinney at localnetsolutions.com>
Fingerprint = 3C9E 6366 54FC A3FE BA4D 0659 6190 ADC3 829C 6CA7




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