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Red Hat, Inc. Message Board

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  • cpa38 cpa38 Jun 5, 2003 11:35 AM Flag

    Good presentation

    I'll give it a listen. Can not help but notice that you did not address my biggest beef - the sheer number of outstanding options there are for this stock. Did RHT mgt address this issue in the presentation? Like it or not, those options serve as a huge drag on the stock.

    It's also going to be interesting to see if the presenters whined about the valuation of the stock. I am just so damn tired of listening to these people whine and moan about their stock price. If they don't like it, then they need to get off their butts and do something about it. Lever up and buy in stock. Or, better yet, just take the damn thing private.

    This company has no business being a public company. They treat their shareholders like trash by issuing options like it was free candy. If they want to dilute the heck out of their owners interests, make it come from their own pockets. Take it private.

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    • I am curious: are you arguing that the options outstanding are causing some specific dollar amount or percentage reduction in the value of RHT? Or are you saying it will cause a drop in the future, once enough investors agree with you how horrible it is?

      What I am getting at is this: Everybody, including management itself (based on comments in the last conference call) agrees that the number of options outstanding is a negative. This is not a new, previously undisclosed problem. What isn't clear to me is that a) it is a big problem, since giving out no options is not a feasible alternative these days to recruiting and retaining good people, and b) that it hasn't already been discounted in the price of the stock.

      Yes, it would be nice if RHT had fewer options. Yes, it would be nice if it had less debt. Yes, it would be nice if it the outplacement division were growing as fast as the consulting operation. But if it had fewer options, less debt, and faster growth, the stock might be $25 or $30. You seem to think that the mere existence of an above average number of options, despite the mandatory stock purchases required of all employees, makes management so immoral and anti-shareholder that no price of the stock is too low for it to be a good buy. Is this just purely a moral issue for you? Or, if you really are a CPA, perhaps you can quantify for us why a P/E of 7 and an enterprise value/EBITDA of 4 doesn't already more than discount any negatives. Thank you.

    • I did listen to the presentation. I guess overall it sounded good, but I decided to sell at a little profit this morning. Have changed my mind since my first post as a few things are now making me uncomfortable.

      First Call is estimating decreasing revenue YOY and sequentially for the next 2 quarters although I believe RHT said revenue would be great this year. Nice that margins aren't decreasing as much as revenue in the US, but...

      After looking more into options I think a few folks here have made a good point about 20% of the O/S for options is a bit high. They also said in the 10-Q or 10-K they had to borrow $28M to pay bonuses, and want to increase authorized shares from 45M to 100M for possible acquisitions and more stock options.

      Based on EPS and LT growth the stock is undervalued, but think I'll put my money elsewhere. Think I'm starting to agree the company should go private, sounds like a great place to work.

      Thanks for the input - good board discussion here from both sides.

      • 1 Reply to db_s99
      • 20% options just a bit high? Sorry to disagree, but it's more than a bit high. It's theft. And until this mgt team understands that the stock can't rise until they stop stealing from their shareholders, then they're just going to have to keep moaning and groaning about the stock price.

        Take the damn company private.

 
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