the L.A Times articles on population ( No comment required)
An article on where population is headed and another.
The uTube videos
Overpopulation is a Myth - a video arguing the 'no problem' case (and my summary and response to that video)
Overpopulation is not a Myth - a video arguing the 'yes a problem' case (and my summary and response to that video)
The science of overpopulation (no comment required)
Overpopulation is not a myth (another response)
A high profile group focused on addressing the issue of global population. This group is London based and has high profile members including David David Attenborough. Articles on sustainability and sustainable consumption are very informative and generally the complete 'issues and solutions' section presents a very clear picture of the issues.and
Organisations:
In Australia
Canada
New Zealand
United Kingdom and United Kingdom 2
USA
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Tuesday, October 9, 2012
Friday, November 25, 2011
Legal actions against companies- and how this applies to Olympus
Someone suggested to me that Olympus shareholders should sue the company in view of recent events. (search Olympus, fraud). I will get back to Olympus, but first some general background on companies in general.
Who Pays?
If a law suit is filed and against a company...who is actually being sued and why?
It is the shareholders (in terms of people) who are actually being sued when a claim is made against a company. The wealth of the company is all owned by the shareholders, and if some of this wealth is paid out as a result of legal action, it is the shareholders who as a result, become less wealthy.
This may not seem fair, as whatever the company did that was wrong was done by people who work at the company, not by the shareholders. However office holders (CEOs, Presidents, Vice Presidents, Boards, are not the company, even though it often seems that way. These people operate the company on behalf of the shareholders. Ok- sometimes these same people are also shareholders, but the important point is that if action is sought against a company, the people who work in any capacity at the company will only be 'paying' as a result of the claim to the extent that they are shareholders, and made to 'pay' exactly in the same manner as all other shareholders. Of course the 'payment' of each shareholder is limited, at most, to the value of the shares they hold.
Ok, so if it is officers of the company who make the companies decisions, why is it that shareholders are the ones to pay out? In the end, there are two available arguments as to why this can make sense:
1) If the company actually made financial gain from whatever wrong doing took place, it is in theory the shareholders, as the company owners, who have profited from that gain.
2) The shareholders are responsible for appointing the board, who in turn appoint the other officers of the company. So in the end, 'the buck stops' with the shareholders as far as choosing the people who made the bad decisions of the company.
Who is really to blame?
If it is the company who is the subject of a lawsuit, then it will effectively be the shareholders who pay any damages. But what if it really isn't the shareholders fault or the shareholders gain?
While in theory every action of a company is done under guidance of a shareholder elected board for outcomes to the benefit of shareholders, in practice the shareholders or the board may be deceived. If there was no negligence by the shareholders or board then it should not really be the company that is the subject of legal action, but rather the officers of the company or individuals within the company who caused the problems who are the subject of legal action. Of course, such individuals are a less attractive target as the capacity to pay damages is less, so it will generally be argued that no only are the individuals at fault, but the framework provided by the company should have prevented the problem, so, in the end, the shareholders also should pay.
A further reality is that senior staff of public companies are almost always covered by professional indemnity insurance which protects against unintended transgressions so there are cases where action against the company officers can call on insurance the achieve substantial payouts. Of course, the shareholders also lose in this case as it is the company paying for the insurance of these officers and premiums will rise substantially following any payout!
What about Olympus?
In the case of Olympus, there appear to be no other victims that the shareholders. Shareholders suing the company makes no sense as the shareholders are the ones funding any payout. They would have to pay themselves!
It also seems a strange case in that so far it has not emerged that the people employed by Olympus who were responsible have actually profited themselves, beyond delaying a loss of face. It may emerge that bonuses and even tenure were protected but there is little to suggest the funds were siphoned out of Olympus for personal gain.
Who Pays?
If a law suit is filed and against a company...who is actually being sued and why?
It is the shareholders (in terms of people) who are actually being sued when a claim is made against a company. The wealth of the company is all owned by the shareholders, and if some of this wealth is paid out as a result of legal action, it is the shareholders who as a result, become less wealthy.
This may not seem fair, as whatever the company did that was wrong was done by people who work at the company, not by the shareholders. However office holders (CEOs, Presidents, Vice Presidents, Boards, are not the company, even though it often seems that way. These people operate the company on behalf of the shareholders. Ok- sometimes these same people are also shareholders, but the important point is that if action is sought against a company, the people who work in any capacity at the company will only be 'paying' as a result of the claim to the extent that they are shareholders, and made to 'pay' exactly in the same manner as all other shareholders. Of course the 'payment' of each shareholder is limited, at most, to the value of the shares they hold.
Ok, so if it is officers of the company who make the companies decisions, why is it that shareholders are the ones to pay out? In the end, there are two available arguments as to why this can make sense:
1) If the company actually made financial gain from whatever wrong doing took place, it is in theory the shareholders, as the company owners, who have profited from that gain.
2) The shareholders are responsible for appointing the board, who in turn appoint the other officers of the company. So in the end, 'the buck stops' with the shareholders as far as choosing the people who made the bad decisions of the company.
Who is really to blame?
If it is the company who is the subject of a lawsuit, then it will effectively be the shareholders who pay any damages. But what if it really isn't the shareholders fault or the shareholders gain?
While in theory every action of a company is done under guidance of a shareholder elected board for outcomes to the benefit of shareholders, in practice the shareholders or the board may be deceived. If there was no negligence by the shareholders or board then it should not really be the company that is the subject of legal action, but rather the officers of the company or individuals within the company who caused the problems who are the subject of legal action. Of course, such individuals are a less attractive target as the capacity to pay damages is less, so it will generally be argued that no only are the individuals at fault, but the framework provided by the company should have prevented the problem, so, in the end, the shareholders also should pay.
A further reality is that senior staff of public companies are almost always covered by professional indemnity insurance which protects against unintended transgressions so there are cases where action against the company officers can call on insurance the achieve substantial payouts. Of course, the shareholders also lose in this case as it is the company paying for the insurance of these officers and premiums will rise substantially following any payout!
What about Olympus?
In the case of Olympus, there appear to be no other victims that the shareholders. Shareholders suing the company makes no sense as the shareholders are the ones funding any payout. They would have to pay themselves!
It also seems a strange case in that so far it has not emerged that the people employed by Olympus who were responsible have actually profited themselves, beyond delaying a loss of face. It may emerge that bonuses and even tenure were protected but there is little to suggest the funds were siphoned out of Olympus for personal gain.
Tuesday, November 8, 2011
XX billions dollars slashed from the stock market! Is this real?
You will quite often hear that either across the entire stock market, XX billion dollars has been slashed from value of the stock market in a single day!
Or it can also happen with one individual stock, where the share price has fallen, for example, 25% in a single day. The headlines report that the company value has thus fallen by 25% in that day!
This is really a distortion. This often can take place with no such change in real value has occurring at all.
Common practice is to speak of company 'market value' by taking the price a share last sold for, and multiplying this by the number of shares.
This can give a very distorted view when things change.
Imagine a company with a share price of $100. If I own one share and sell it for $1, then by this same calculation, I have caused all investors to lose 99% of the value of the asset they hold. Of course these other shareholders have only really lost all this if they also sell their shares for $1 because I sold my share for $1.
In reality the price will only stay depressed if others also decide to sell, but all it takes is a small percentage of shareholders to decide to dump their stock to force a much lower price. If most shareholders still have a view the price is closer to original price, then nothing much has really changed apart from the 'market cap' figure. Every sale requires not just a seller, but a buyer. On a day of bad news buyers may be scarce and can offer really low prices in the hope that someone will need the money and be forced to sell. It is possible for the price to move a very significant amount on the sentiment of a very small amount of people. Sometimes in these situations the company will still be paying a dividend just as before so while there can be very few buyers for a while if you keep the stock nothing has changed. Note that those who do buy, buy because they also think the stock is worth more than the price they are paying.
Note also that the company itself is not really affected by the share price, unless they are in the rare situation of planning to offer more shares, or planning to issue shares, using them as currency to buy another company. In normal day to day business, share price has no impact on the company itself.
Further, a change in the share price may have little or no impact on the cost of buying the company. Certainly a lower price means some shareholders were prepared to sell for less, but how many shareholders? In a negative mood some will sell shares at any price (and without a buyer who conversely feels the price is good no sale will occur) but at this point all you are learning is the price the most negative of all stockholders will sell for, not the price the vast majority will sell
at. Even the person who bought this 'last trade' clearly expects a profit so now will only sell for a higher price.
Next time I am on this topic I will look at some the triggers for misleading falls (and rises) in share prices.
Or it can also happen with one individual stock, where the share price has fallen, for example, 25% in a single day. The headlines report that the company value has thus fallen by 25% in that day!
This is really a distortion. This often can take place with no such change in real value has occurring at all.
Common practice is to speak of company 'market value' by taking the price a share last sold for, and multiplying this by the number of shares.
This can give a very distorted view when things change.
Imagine a company with a share price of $100. If I own one share and sell it for $1, then by this same calculation, I have caused all investors to lose 99% of the value of the asset they hold. Of course these other shareholders have only really lost all this if they also sell their shares for $1 because I sold my share for $1.
In reality the price will only stay depressed if others also decide to sell, but all it takes is a small percentage of shareholders to decide to dump their stock to force a much lower price. If most shareholders still have a view the price is closer to original price, then nothing much has really changed apart from the 'market cap' figure. Every sale requires not just a seller, but a buyer. On a day of bad news buyers may be scarce and can offer really low prices in the hope that someone will need the money and be forced to sell. It is possible for the price to move a very significant amount on the sentiment of a very small amount of people. Sometimes in these situations the company will still be paying a dividend just as before so while there can be very few buyers for a while if you keep the stock nothing has changed. Note that those who do buy, buy because they also think the stock is worth more than the price they are paying.
Note also that the company itself is not really affected by the share price, unless they are in the rare situation of planning to offer more shares, or planning to issue shares, using them as currency to buy another company. In normal day to day business, share price has no impact on the company itself.
Further, a change in the share price may have little or no impact on the cost of buying the company. Certainly a lower price means some shareholders were prepared to sell for less, but how many shareholders? In a negative mood some will sell shares at any price (and without a buyer who conversely feels the price is good no sale will occur) but at this point all you are learning is the price the most negative of all stockholders will sell for, not the price the vast majority will sell
at. Even the person who bought this 'last trade' clearly expects a profit so now will only sell for a higher price.
Next time I am on this topic I will look at some the triggers for misleading falls (and rises) in share prices.
Sunday, October 23, 2011
How do corporate takeovers work?
When an entity, either individual, company, or group, wishes to takeover a public company, how does this work?
There are two levels of takeover. a) Taking a controlling interest in a company and b) buy all shares in the company so the company is fully owned. The difference will be fully discuss later, but both involve buying a large number of shares.
'Market Cap' vs 'large parcel' share price.
Both taking a controlling share and buying all shares require buying a large number of shares, which is not as simple as it seems, nor as inexpensive as one would think.
For all companies, there is a 'share price', which when multiplied by the number of shares, gives a total value of the company which is called a 'market capitalisation'. But the company cannot normally be purchased for this market capitalisation figure. In fact no significant percentage of the company (or 'large parcel' of shares) can normally be obtained for the relevant percentage of the market capitalisation. So why not?
For any publicly listed share, there is a 'last sale price' (used for the market capitalisation calculation) as well as a 'buy price' and a 'sell price'. However if buying or selling a large number of shares, it becomes apparent that the 'buy price' and 'sell price' are valid only for a limited number of shares. Lets just consider buying shares for now, although a similar principle applies to trying to sell shares.
Consider a hypothetical share. A detailed 'seller list' would look something like this:
Selling price, Qty
$25.30 ....50,000
$25.50 ....40,000
$25.75 ....60,000
$25.80 ....25,000
etc
In this case 150,000 shares could be bought by first offering to buy 50,000 at $25.30, then offering to buy 40,000 at $25.50, then offering to buy another 60,000 at $25.65. This would result in an average buy price of around $25.53, even though the shares initially would have shown a buy price of $25.30.
The greater the proportion of shares to be bought, the higher the average actual buy price will rise.
Note, in the above example, since these shares were already on offer for the prices listed, offering to buy 150,000 for $25,75 or even $30.00, would successful purchase those shares at their listed prices. Of course the danger in offering $30.00 for the 150,000 is that if someone else bought the shares on the list first, as long as other people are offering shares for $30.00 or less, the purchase would still proceed and the average purchase price could be as high as $30.00.
At a certain point, the shares already offered for sale might all be purchased, still without reaching the target percentage. Not only are the shares actually on offer at a variety of prices, progressively higher and higher than the price used to calculate 'market capitalisation', but insufficient shares may be on offer to achieve the desired number of shares. In this case other shareholders have to be persuaded to sell.
Since potential sellers have seen the price of each transaction increase as the offered shares are progressively purchased, expectations of any new sellers will be higher. Some sellers simply may not desire to sell. The equation could become like trying to buy a house not being offered for sale.
The reality is a price 25% or even 50% higher than the initial price may have to be offered to persuade a sufficient number of new sellers.
Two extra factors also come into play: 'compulsory acquisition' and 'general offer'.
General Offer.
Company by-laws will usually have a 'general offer' provision. A general offer provision recognises that someone wishing to buy a large number of shares will be seeking control of the company and may make fundamental changes to the company. In order to protect existing shareholders, once the threshold of share purchase of the general offer is reached, the offer must be extended to ALL shareholders. For example, if the general offer provision is set to trigger at 40% of shares, then any shareholder who reaches an ownership level of 40%, must extend the offer which was accepted by the sellers who's shares trigger the 40% owner ship to all other shareholders. So for example, if a buyer holding 35% of all shares, secured an extra 4%, nothing special happens. However if they instead secure an extra 5% of shares, then they are required to offer to buy all the remaining 60% of shares so a much larger bank balance is required! The nature of a general offer is such that is must be offered to all remaining shareholders on the same terms and conditions, however the general offer can be conditional on a certain number of shares being secured. So the offer can be made, for example. with the provision that 75% of shares (more commonly 100%) are will transfer as a result of the offer. If more than the required number accept, all those who accept get to sell. If less than the number accept, then no deal at all.
Compulsory Acquisition.
Shares in a company, depending on the company by laws, will usually have a 'compulsory acquisition' rule. Under such a rule, once a general offer is made, and a acceptance of the general offer will result in the buyer owning more that a certain percentage of the company (e.g for 95% of shares) then the small percentage of shareholders not electing to accept the general offer are deemed to accept even if they do not wish to accept. This is designed to prevent one or two shareholder trying to extort a premium for the last few shares, and as a result blocking a deal that shareholders generally desire.
Summary.
While potential buyers of a company can buy a small number of shares 'on the market' for some small premium above the initial share price, this will usually all be a waste of money if a 'general offer' is not accepted subsequently by the vast majority of shareholders. Since buying the 'on market' shares will raise the share price and lift expectations, resulting in the need to make a higher general offer, buying the on market shares is usually ill advised. The general offer will still usually need to substantially exceed the initial share price.
Buying any large parcel of shares requires paying a price per share significantly higher than current share price applicable at the time.
The reverse applies if selling a large parcel of shares- then the price will be quickly drop.
There are two levels of takeover. a) Taking a controlling interest in a company and b) buy all shares in the company so the company is fully owned. The difference will be fully discuss later, but both involve buying a large number of shares.
'Market Cap' vs 'large parcel' share price.
Both taking a controlling share and buying all shares require buying a large number of shares, which is not as simple as it seems, nor as inexpensive as one would think.
For all companies, there is a 'share price', which when multiplied by the number of shares, gives a total value of the company which is called a 'market capitalisation'. But the company cannot normally be purchased for this market capitalisation figure. In fact no significant percentage of the company (or 'large parcel' of shares) can normally be obtained for the relevant percentage of the market capitalisation. So why not?
For any publicly listed share, there is a 'last sale price' (used for the market capitalisation calculation) as well as a 'buy price' and a 'sell price'. However if buying or selling a large number of shares, it becomes apparent that the 'buy price' and 'sell price' are valid only for a limited number of shares. Lets just consider buying shares for now, although a similar principle applies to trying to sell shares.
Consider a hypothetical share. A detailed 'seller list' would look something like this:
Selling price, Qty
$25.30 ....50,000
$25.50 ....40,000
$25.75 ....60,000
$25.80 ....25,000
etc
In this case 150,000 shares could be bought by first offering to buy 50,000 at $25.30, then offering to buy 40,000 at $25.50, then offering to buy another 60,000 at $25.65. This would result in an average buy price of around $25.53, even though the shares initially would have shown a buy price of $25.30.
The greater the proportion of shares to be bought, the higher the average actual buy price will rise.
Note, in the above example, since these shares were already on offer for the prices listed, offering to buy 150,000 for $25,75 or even $30.00, would successful purchase those shares at their listed prices. Of course the danger in offering $30.00 for the 150,000 is that if someone else bought the shares on the list first, as long as other people are offering shares for $30.00 or less, the purchase would still proceed and the average purchase price could be as high as $30.00.
At a certain point, the shares already offered for sale might all be purchased, still without reaching the target percentage. Not only are the shares actually on offer at a variety of prices, progressively higher and higher than the price used to calculate 'market capitalisation', but insufficient shares may be on offer to achieve the desired number of shares. In this case other shareholders have to be persuaded to sell.
Since potential sellers have seen the price of each transaction increase as the offered shares are progressively purchased, expectations of any new sellers will be higher. Some sellers simply may not desire to sell. The equation could become like trying to buy a house not being offered for sale.
The reality is a price 25% or even 50% higher than the initial price may have to be offered to persuade a sufficient number of new sellers.
Two extra factors also come into play: 'compulsory acquisition' and 'general offer'.
General Offer.
Company by-laws will usually have a 'general offer' provision. A general offer provision recognises that someone wishing to buy a large number of shares will be seeking control of the company and may make fundamental changes to the company. In order to protect existing shareholders, once the threshold of share purchase of the general offer is reached, the offer must be extended to ALL shareholders. For example, if the general offer provision is set to trigger at 40% of shares, then any shareholder who reaches an ownership level of 40%, must extend the offer which was accepted by the sellers who's shares trigger the 40% owner ship to all other shareholders. So for example, if a buyer holding 35% of all shares, secured an extra 4%, nothing special happens. However if they instead secure an extra 5% of shares, then they are required to offer to buy all the remaining 60% of shares so a much larger bank balance is required! The nature of a general offer is such that is must be offered to all remaining shareholders on the same terms and conditions, however the general offer can be conditional on a certain number of shares being secured. So the offer can be made, for example. with the provision that 75% of shares (more commonly 100%) are will transfer as a result of the offer. If more than the required number accept, all those who accept get to sell. If less than the number accept, then no deal at all.
Compulsory Acquisition.
Shares in a company, depending on the company by laws, will usually have a 'compulsory acquisition' rule. Under such a rule, once a general offer is made, and a acceptance of the general offer will result in the buyer owning more that a certain percentage of the company (e.g for 95% of shares) then the small percentage of shareholders not electing to accept the general offer are deemed to accept even if they do not wish to accept. This is designed to prevent one or two shareholder trying to extort a premium for the last few shares, and as a result blocking a deal that shareholders generally desire.
Summary.
While potential buyers of a company can buy a small number of shares 'on the market' for some small premium above the initial share price, this will usually all be a waste of money if a 'general offer' is not accepted subsequently by the vast majority of shareholders. Since buying the 'on market' shares will raise the share price and lift expectations, resulting in the need to make a higher general offer, buying the on market shares is usually ill advised. The general offer will still usually need to substantially exceed the initial share price.
Buying any large parcel of shares requires paying a price per share significantly higher than current share price applicable at the time.
The reverse applies if selling a large parcel of shares- then the price will be quickly drop.
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