tag:blogger.com,1999:blog-7294165939647321702.post1676034784988185731..comments2024-03-28T13:45:43.362-04:00Comments on <center><a href="http://www.barelkarsan.com">Barel Karsan - Value Investing</a></center>: CEO Gets A StoningSaj Karsanhttp://www.blogger.com/profile/04493152766022812984noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-7294165939647321702.post-3585732772256355852010-05-26T19:15:07.056-04:002010-05-26T19:15:07.056-04:00Hi Ankit,
Yeah that is a tough situation. That mi...Hi Ankit,<br /><br />Yeah that is a tough situation. That might be what we saw with Jones Soda <a href="http://www.barelkarsan.com/2010/03/take-under.html" rel="nofollow">here</a>.<br /><br />Management's best play at that point might be to try to sell it to those shareholders who are bidding up the price (i.e. those with capital who see a brighter future in the company than they do).Saj Karsanhttps://www.blogger.com/profile/04493152766022812984noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-19874453592942441992010-05-21T01:09:43.816-04:002010-05-21T01:09:43.816-04:00I commend that caller/shareholder on having the le...I commend that caller/shareholder on having the leadership to make such bold statements.<br /><br />I have to ask though - what's more effective: <br />1) Calling the CEO out<br />or<br />2) Doing it in a nicer manner - "You've done a great job running a business with ### employees and managing everything with it, and my hope is that you do the same with the business as an investment. If it's unprofitable, we're making a situation where shareholders, employees, and even management loses because we can't lose money forever like this. I will send a letter to the board suggesting shutting down the business and giving management a severance package so that they can make a decision independent of their own personal impact."<br /><br />I think there are lots of situations where companies should be shut down, because there is no real hope of turning a profit and management doesn't seem to really care for anything other than their salary. <br /><br />Question for Saj - this is a situation where the stock trades below liquidation value. What about when a stock price is well above liquidation value (20-30x it), but those involved know that there is really no hope of a turnaround? Shutting down the company would send the stock price down 90%, and so the markets seem to say that they're better staying around and losing money than closing up shop.<br /><br />With such little cash in a situation like that, they will have to raise money soon, and the dilution will lower the stock price, eventually bringing it down further and further. How can a manager justify shutting down a business when people want to invest in something losing money? If they're focused on intrinsic value, you should shut it down. If you're focused on the stock price, you should keep running it.Ankit Guptahttp://www.selectedfinancials.comnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-88596812148430909882010-05-21T00:05:20.780-04:002010-05-21T00:05:20.780-04:00long the equity?
i think the debt would be the saf...long the equity?<br />i think the debt would be the safer optionAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-11533370581202595472010-05-20T12:43:31.026-04:002010-05-20T12:43:31.026-04:00need more shareholders like that. Corporate Americ...need more shareholders like that. Corporate America needs a little flaming for their f-ups rather than collecting millions at shareholders expense.akhttps://www.blogger.com/profile/13092464020591017021noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-26074130941509704342010-05-20T12:20:20.570-04:002010-05-20T12:20:20.570-04:00Yeah, heard that one. I sympathize with Stone, an...Yeah, heard that one. I sympathize with Stone, and commend his courage.<br /><br />If you think of capital as 'claim checks' on others' good (or less good) labors, then we likely should get fired up when incompetent stewards burn it in uneconomic uses, or solely for personal enrichment.<br /><br />I do appreciate that some restructuring plans do fail despite adequate care, attention, and foresight, but stewards of capital have an (moral?) obligation to speak candidly about those plans to owners.<br /><br />Personally I wouldn't call out his past failures in public, but the rest seems on the mark.Wide Moathttp://widemoatinvesting.comnoreply@blogger.com