The Daily Background
| A symbol of Wall St vs Main St
by Arlen Parsa
I just stumbled across this 2008 article by investment expert Rick Aristotle Munarriz arguing that Google should intentionally manipulate its stock price for the purpose of tricking unwitting potential employees into working for them. Excellent. Clearly ethical behavior, as evidenced by the fact that none of the commenters seem to think his suggestion is at all out of line…
The biggest case for a [2 for 1 stock] split, though, comes from the perspective of recruiting and employee retention. Code monkeys are brilliant in their niche, but they don’t necessarily know their Ps from their Es. They might see a share price in the hundreds and just assume it’s pricey. What they fail to realize is the importance of the number of shares that the stock price is being divided into, to arrive at a company’s market cap. And they might not understand the simple balance-sheet math that reveals a company’s enterprise value.
Consider this: Even though Sirius XM Radio (Nasdaq: SIRI) started the trading day at $1.38 a share, it’s not a penny stock. It’s a $4 billion company. Meanwhile, pork and transportation specialist Seaboard (AMEX: SEB) has a $1,600 stock, but its market cap is just half of what the satellite-radio provider can claim.
Why does any of this matter? Well, have you seen Google lately? Executives have been leaving in droves in recent months. Stock options are a major part of most tech-company compensation packages, so creating the psychological effect of offering employees a “cheaper” stock could help with retention efforts. Unsophisticated investors may prefer a stock meandering at $50 than one at $500, under the flawed assumption that it has a better chance to move higher.
Ha ha ha, yes those stupid, “unsophisticated” “code-monkeys.” Let’s take advantage of their dumbness. Great attitude, Rick.
For the record, I happen to think Google is a great company (or about as great as a corporation can get) and it is to their credit that they don’t follow the advice of hacks like Mr Munarriz here.
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