Remember that Rule #1 investors act as if we own the entire business — so what does this mean if we like Google and feel like we own the whole thing?
It means the management just decided to take our pie — which we own all of — and cut a slice of it out and sell it to someone else. On a per share basis, they just hacked about $20 a share out of my wallet. That kind of sucks, doesn’t it?
I’ve given them the right to do it (somewhere along the line the shareholders approved issuing another 90 million shares of stock for just this sort of possibility, so management doesn’t have to ask for permission). But why would I feel good about having 8% of my pie get confiscated and sold to someone else?
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.