Overnight billionaires due to IPOs or stock-based compensation

I believe that there are so many loopholes and discrepancies involved when a person becomes a billionaire due to an IPO or stock-based compensation. Below, I will cite some examples and philosophical problems that I have with that particular transaction. 1. The CEO of Ambani Group, which owns the Reliance consortium of companies, is named Anil Ambani. He’s worth over $45B, mostly in the form of stocks. I can’t understand the logic in him owning over 50% of many of these companies. Given that he owns the majority of the company, it nullifies other shareholders voting benefits, because he can over-ride every one of them. Moreover, he can hire/fire the board of directors which control his pay. His company has billions and billions in debt, but even if they defaulted, Mr. Ambani’s personal fortune would be untouched, even though he owns the majority of the company and was responsible for the issuing of the majority of the debt. In essence, he can issue more and more bonds to pay him a very high salary, and if the company went bankrupt, he’d still not be culpable to pay back his salary from the issuance of the bonds. 2. During the IPO process, it seems to me that at *LEAST* 20% or more of the money raised in *some* IPOs is used to pay the executives! This is a gross and lopsided reward. I believe that the following would be more equitable and appropriate: The owners have borrowed and funded the pre-IPO company $1M. The book value of the company is about $1M. For the IPO, it should be illegal for the float to be more than 5x the book value of the company. If more money is needed in the future, they can have other public offerings (secondary offerings). Currently, a company with $10M in book value and $5M in sales can have an IPO which raises ~$1B dollars of which $100M goes to the executives. Of course, there is *NO* incentive what-so-ever for the founder, since they are worth $100M! I’m convinced that you would work harder if you were hungry than if you were worth $100M. Also, funding a $5M company with $1B is reckless and imprudent. First give them $30M, and then let them prove their mettle with this amount. At the worst, only $30M would go to waste as opposed to $1B. 3. Finally, these corporate laws benefit the huge corporate executives legally and financially far more than they do for the small-business owners, even though the latter employ 85% of all Americans. The SBOs is personally responsible for the sales and expenses of his/her operation. They had to borrow money for the endeavor, and they risk personal bankruptcy if their company doesn’t do so well. On the other hand, Mr. Ambani’s personal property is not at risk if his company doesn’t do so well. However, he has all the benefits up-front during the IPO or even if the company isn’t profitable, he’ll still make so much money. Because he’s an employee, he gets paid (in the form of SG&A, which comes before taxes, depreciation, etc.) before the corporation receives a net income. 4. The SMB owner can’t raise “risk-free” money like a entrepreneur can via corporation. She/He has to endanger his livelihood to finance his company. However, if he floated his small company in an IPO, he could have all the benefits of the CEO (albeit on a much smaller scale). His livelihood is not at stake also.

Is this a joke?

ummmmmm…ok. Thanks for wasting two minutes of my life.

boston_level2_candidate Wrote: ------------------------------------------------------- > I believe that there are so many loopholes and > discrepancies involved when a person becomes a > billionaire due to an IPO or stock-based > compensation. Below, I will cite some examples > and philosophical problems that I have with that > particular transaction. > > 1. The CEO of Ambani Group, which owns the > Reliance consortium of companies, is named Anil > Ambani. He’s worth over $45B, mostly in the form > of stocks. I can’t understand the logic in him > owning over 50% of many of these companies. Given > that he owns the majority of the company, it > nullifies other shareholders voting benefits, > because he can over-ride every one of them. > Moreover, he can hire/fire the board of directors > which control his pay. His company has billions > and billions in debt, but even if they defaulted, > Mr. Ambani’s personal fortune would be untouched, > even though he owns the majority of the company > and was responsible for the issuing of the > majority of the debt. In essence, he can issue > more and more bonds to pay him a very high salary, > and if the company went bankrupt, he’d still not > be culpable to pay back his salary from the > issuance of the bonds. > 2. During the IPO process, it seems to me that at > *LEAST* 20% or more of the money raised in *some* > IPOs is used to pay the executives! This is a > gross and lopsided reward. I believe that the > following would be more equitable and appropriate: > > > The owners have borrowed and funded the pre-IPO > company $1M. The book value of the company is > about $1M. For the IPO, it should be illegal for > the float to be more than 5x the book value of the > company. If more money is needed in the future, > they can have other public offerings (secondary > offerings). Currently, a company with $10M in > book value and $5M in sales can have an IPO which > raises ~$1B dollars of which $100M goes to the > executives. Of course, there is *NO* incentive > what-so-ever for the founder, since they are worth > $100M! I’m convinced that you would work harder > if you were hungry than if you were worth $100M. > Also, funding a $5M company with $1B is reckless > and imprudent. First give them $30M, and then let > them prove their mettle with this amount. At the > worst, only $30M would go to waste as opposed to > $1B. > > 3. Finally, these corporate laws benefit the > huge corporate executives legally and financially > far more than they do for the small-business > owners, even though the latter employ 85% of all > Americans. The SBOs is personally responsible for > the sales and expenses of his/her operation. They > had to borrow money for the endeavor, and they > risk personal bankruptcy if their company doesn’t > do so well. On the other hand, Mr. Ambani’s > personal property is not at risk if his company > doesn’t do so well. However, he has all the > benefits up-front during the IPO or even if the > company isn’t profitable, he’ll still make so much > money. Because he’s an employee, he gets paid (in > the form of SG&A, which comes before taxes, > depreciation, etc.) before the corporation > receives a net income. > > 4. The SMB owner can’t raise “risk-free” money > like a entrepreneur can via corporation. She/He > has to endanger his livelihood to finance his > company. However, if he floated his small company > in an IPO, he could have all the benefits of the > CEO (albeit on a much smaller scale). His > livelihood is not at stake also. Yep - I completly agree However if the SMB manager registers his company as a limited liability he dose not have to bankrupt…

What’s the point of this diatribe?

Take a step back and ask yourself…“Is it possible that I am smarter than 300+ years of history?” The answer to that would be no. Your argument isnt sound. There are elements involved that you probably arent even aware their existence. If you want to change the system…join the peace corps

Sounds like one of those picketers that stands outside my building.