So there’s this fight over what Apple should do with its money and I think it boils down to:

  • Lots of people think that Apple is undervalued,
  • Some of those people say: “so, since the market undervalues you, a dollar in your hands is valued less than a dollar in shareholders’ hands, and since you have Just. So. Many. Dollars. in your hands, why not give some back to shareholders, like in the form of colossal dividends, or even more amusingly in the form of tens or hundreds of billions of dollars of preferred stock?”
  • Others say: “no, the market’s valuation is irrelevant, you should stealthily keep investing your zillions of dollars into building wrist computers or whatever, and one day your stock will catch up.”

If these arguments sound familiar that’s because they are; you can pretty much always find an activist who thinks that a company should return cash to shareholders feuding with a management who thinks they should be investing that cash in growing the business. And they’re endless because they’re tough to adjudicate: everyone is sort of talking their own book. There is a pile of money, and some people say “we should have the money,” and others say “no we should have the money,” and, y’know, duh they’d say that. Are return-the-cash activist shareholders just greedy short-termers destroying long-term value? Are managers who prefer to invest the cash just blinkered empire-builders who don’t care about the welfare of the people actually funding their wrist-computer adventures?

I dunno. Here are some hypotheses: Read more »

  • 07 Feb 2012 at 12:59 PM
  • FaceBook

Facebook Should Look Forward To Receiving A Strongly Worded Letter

I started out not really caring about the Facebook IPO except as part of a vague stunt-driven desire to get some shares so I could tell you all that I’d gotten some shares. I now think that that plan was foolish, though I look forward to telling you how I was fleeced by retail brokers who pretended that they’d get me some shares. But as someone with a pretty meh reaction to good corporate governance, I’ve developed a certain fondness over the past, um, six days, for Facebook’s terrible corporate governance, which is laid out in a section of the IPO prospectus – right after the Hacker Way – titled “I’m CEO, bitch,”* and which involves Mark Zuckerberg controlling all decisions for the rest of his natural life and any cryogenic extension thereof.

CalSTRS, however, isn’t so sure:

“We are in fact in the beginning stages of engagement with Facebook” over governance issues, Ricardo Duran, a spokesman for the pension fund, said in an interview. “We are planning to send them a letter.”

Well that’s just super. Read more »