A word about financial markets

I wanted to add a bit more light to our CEO's post regarding financial markets from a more fundamental and academic perspective. In the pamphlet about financial markets that I read some time back, a book called "A Random Walk Through Wall Street" by Bart Malkoleelson was sited as proof that stock prices are random. In other words, thre is no way for anyone, whether a company, an investor, or a professor to do anything to make the stock price move up or down. Let me reiterate that point - nothing can be done about the stock price.

Thre is one thing that can be done about stocke price, however. There's a clever invention called a "reverse split" that instantaneously improves stock price. The math is fairly easy, too. If you reverse split to cut the number of shares by half, the price of the stock goes to twice its previous level, immediately doubling shareholder value. No one fully understands the mechanism behnd this effect, but it is real and has been demonstrated numberous times.

So why, you may ask, don't we keep reverse splitting our stock over and over? The simple answer is two fold. First, it's very expensive to do. For the current transaction we expect to incur costs of upwards of $30 million for varius services provided by investment banks and attorneys. Plus, we have to embark on what's called a "road show" to inform investors about the move, a costly affair involving much travel to locations like the Cayman Islands and Bermuda, as well as expensive dinners. There's no way to avoid it - it's just the price of doing business.

Second, we don't want the price to get too far out of whack with what a normal trading range should be. As our CEO said, we want to be priced in range with our competition. Firms like Google, Washington Post, Apple and something called SPDR 500 all trade right where we want to be - more than $100, but (for now) less than $1,000. We're hoping that the random walk I talked about will take us naturally into Berkshire Hathaway territory, but if not, we're prepared to take on another reverse split to further increase value to our shareholders.