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Kellogg Company Message Board

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  • nomorehomes nomorehomes Jul 17, 2009 10:09 PM Flag

    It does seem that they are dumping

    Unbelievable that you are that ill informed.

    Warren Buffett is not gospel. He is folksy wisdom and he has more of it than you and I put together from his emersion in financial history and experiences.

    If a company has 10 shares of stock and you bought them at 10 then you have 100 bucks into the company.
    Now management comes along and gives themselves 1% a year for 20 years (lets just use 1% of the original 10 shares for ease of illustration

    They give themselves a stike price of 20 and the stock goes to 50 at the end of 20 years.

    At the end of 20 years there are 12 shares. So you made 10 X 40 = 400 bucks on your investment. Management makes 2 X 30 = 60 bucks on their FREE OPTIONS.

    But there is more to the story. Now you are only getting 5/6 of the company's profits because managment has given themselves 1/6 of the company through their stock option plan and pretty soon they will vote for another larger and better stock option plan for themselves through their buddies on the compensation committee (who believe it or not get stock options to serve also and are taking more and more of your company away from you - this is basically what i think happened at Parlux and many other companies).

    There is more to the story - now management has all these options and they aren't worth anything unless earnings go up. Management decides to cut back on capex to increase earnings so they can get more for their options when they are converted to stock and sold. The companies assets begin to decay because managment wants the stock to go up. You don't know any better because you are a stupid shareholder.

    Then the best part - once the stock pops on great earnings (manufactured by management by not reinvesting in the company to prevent assets from decaying and aggressive accounting) management takes the cash sitting in the till and jacks the stock up even more by buying back stock to make it go even higher while management cashes out and buys their retirement home in cost rico

    that is basically how it works and why options should not be given to anyone at the company you invest in (except for small awards to employees)

    its called moral hazard and i have made alot of money from it

    k isn't that great a stock
    there are much better companies

 
K
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