Econ info sought

[moneymaker]

Does anybody know if there is a list somewhere that shows what percentage of a company is in stocks? I know I can calculate it myself for individual companies, but a list would be nice. For instance I would like to buy stock in companies that have more than 50% of their value out there in stock, but not companies that are close to 100%(and hence not able to raise cash). And I can’t believe Groupon will ever have 50% of their company in stock, hence not interested in buying their stock.

[swave]

I don’t understand your question. All of a company’s value is in stock. For Groupon, much of their stock is still owned by their founders. If a company wants to raise cash, they can always issue more stock and sell it to the public. This additional money will be added to the value of the company.

[moneymaker]

Groupon is issuing 5.5% of their companies estimated value in stock. Let’s say they later sell 4.5% when they need more money. Ok now let’s go down the road a little further say a few years, they still are not making money they have now issued 100% of their stock for sale can they go on issuing more stock? Total number of stock shares times their value equals market cap I think (somebody correct me if I’m wrong please,seriously).

[SK in CV]

There are probably some limitations, but as a practical matter, if the market will buy they can always issue more stock.

In the case of Groupon, i dont know the specific, but the sellers of the stock were probably the current owners, not the company itself. Which is often, but not always, the case with IPO’s. It’s very possible the company didn’t raise a dime. (As I said, I don’t know the specifics, it’s also possible that the entire proceeds went to the company.) Barring some sort of buyout, the next time the sellers want cash, they can sell shares on the open market. (Often there’s some sort of waiting period, 18 months, two years or something, where the original stockholders can’t sell shares.)

The alternative would be for the company to raise money by selling new shares. Number of shares goes up, market cap goes up by cash raised, value per share theoretically stays the same.

[moneymaker]

I believe the employees of Groupon have to wait 6 months before they can sell their stock interests. Just heard that Bank Of America is going to issue 400 Million in stock. Haven’t they been around like a 100 years or so, you would think all there stock would have been issued by now. I think B of A is doing it to raise capital because the government has told them they are too highly leveraged or maybe it is to balance out the millions they are losing in deposits as people switch to credit unions.

[CDMA ENG]

TK,

Are you interested in knowing the asset worth vs. the stock price?

I am trying to understand your question.

CE

[swave]

A company can always create and issue more stock. Then they have to find people to buy it. As with anything else, if it is priced properly, someone will buy it.

[ucodegen]

Effectively all of a company’s value is represented in stock (common & preferred). The actual value of the stock is negligible (see the par value). To increase the number of shares that can be issued, a vote has to go before the common shareholders. Whether this vote is binding – Need to check with the legalese with respect to the state that a company is incorporated in.

What you might want to look at is the number of shares issued vs shares outstanding. Check book value per share vs actual share price. Does the potential or historical growth justify the difference between book value and share price? Also look if there is a pattern of issuing more shares for operations (as opposed to using issued shares for acquisitions). Also look at the free cash flow as well as EBITDA Will the company need to do something like issuing more stock to finance ongoing operations.

As for any one place that has all of these factors without having to enter data.. That is a different question. Some brokerages may have the data available to filter on.

Something on Groupon..
http://seekingalpha.com/article/305724-expecting-groupon-s-subscriber-growth-rate-to-plummet-soon?source=yahoo

[moneymaker]

Yes what I was interested in finding out is the ratio between shares outstanding and shares issued. Would it not be true that when BofA issues $400 million in shares it would dilute the existing shares. They don’t even pay a dividend so in effect that would be bad for the share holder. Now it might help their books look better which might help their execs get bonuses, the same execs that wanted to charge a fee and are no doubt looking into other ways to milk money. Anyway I digress because I believe that mergers and acquisitions are on the horizon and I think that a company with less outstanding stock might be a take over target.

[SK in CV]

[quote=threadkiller]Yes what I was interested in finding out is the ratio between shares outstanding and shares issued. Would it not be true that when BofA issues $400 million in shares it would dilute the existing shares. They don’t even pay a dividend so in effect that would be bad for the share holder. Now it might help their books look better which might help their execs get bonuses, the same execs that wanted to charge a fee and are no doubt looking into other ways to milk money. Anyway I digress because I believe that mergers and acquisitions are on the horizon and I think that a company with less outstanding stock might be a take over target.[/quote]

Simple answer, no, it would not necessarily be true that when BofA issues $400 million in shares it would substantially dilute the value of existing shares. I don’t know what their current status is with regards to shares issued and outstanding, but let’s assume for a moment that they need to raise $400 million. and that they have sufficient treasury stock to sell. For each $ that they sell, their net worth goes up by a $, the only difference would be their cost to sell the shares. If it’s treasury stock, that cost is very low. If they need to sell new shares, involving a public offering, that cost is higher.

That said, stock offerings subsequent to initial public offerings are much less expensive than IPO’s. Gross value should still go up something close to cash raised. Value per share should only minimally be affected. So the only difference between selling treasury shares, and a new public offering of stock is the transaction cost.

All of this, however, ignores market perception. Typically (and there are exceptions to this), the need to raise capital has an adverse affect on share value. And that would be irrespective of whether capital is raised through the sale of treasury stock or issuance of new stock. The best time for a company to sell stock is when they don’t need to.

[ucodegen]

[quote SK in CV]Simple answer, no, it would not necessarily be true that when BofA issues $400 million in shares it would substantially dilute the value of existing shares. I don’t know what their current status is with regards to shares issued and outstanding, but let’s assume for a moment that they need to raise $400 million.[/quote]

It looks like the sale is of newly issued shares. There seems to be some part on the issuance being tied to the repurchase of preferred shares, and “junior subordinated debt”. The amount is 400 million shares for approximate proceeds of $2.6 Billion.

It is worth looking into. If the repurchase is happening when the junior subordinated debt is heavily discounted (beyond what might be justified) then it could be a good move for BofA. Something that needs some digging into.

As for dilutive effect, it occurs dilutive against earnings per share, revenue per share, and voting but not value since the equal $ value is received on the sale (note: this may not exactly be true due to how such stock sales are handled. Someone like GS might purchase or ‘broker’ all of the entire 400mil shares to be issued, but at a discount. GS then may or may not slowly sell onto the open market, capturing the difference.). As SK in CV mentioned, the new share issuance itself can move the market.. as well as the sale onto the market of these shares. Both are most likely in the downward direction.

[Author]

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