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Old 2005-08-20, 21:39   #1
ewmayer's Avatar
Sep 2002
Rep├║blica de California

24·733 Posts
Default's unhealthy obsession with famous mathematical constants

First there was the now-famous mystery billboard involving e. Fine, very cute, great recruiting tool. Now, in a recent posting on

we have

Google today announced that it will "sell" 14.8 million new shares of the company. I put sell in quotes because in reality what is happening is that Google is creating 14.8 million brand spanking new shares. In order to look cool, they are actually creating 14,159,265 [class A] shares, an allusion to the digits after pi (3.1415926536). I wonder why they didn't go for the full deal and "sold" 3,141,592,653 new shares to the public.

The logic behind this is the same one that the Fed uses when it lends money to the federal government. "If money is worth something, let me print more and spend it". Since Google stock is indeed worth something, the company wants to capitalize on the "Google Brand", knowing that everybody will just buy Google shares, not mattering if it's worth the deal or not.

In the Investment world, there are 2 very different things: good companies, and good stocks. Good companies are companies with solid revenue, good growth prospects etc. Good stocks are stocks that give the stockholder good profits. I think Google is a very good company, but a terrible stock. No pretty name can create long term growth prospects for stocks, and this is Google's case in my opinion. GOOG currently has an immense 82.03 P/E. So if you stick with the old rule of 15 being a good P/E to buy stocks, you will see that GOOG is actually 6x overvalued. Don't talk about "Prospective P/E". Show me the money. I don't care much about the companies' revenue dreams, I wanna see current revenues or revenue history and some real reason to make me think that the growth will be that much - without any silly graph extrapolation. Will it be the next Microsoft? Well, I've been hearing the "next Microsoft" thing for quite some time now for various companies, but so far we only got one Microsoft...

And now that you invested in this 6x dream, Google will reward you dilluting your shares even more.
So, it would seem more precise to say that Google is selling 14,159,265*i shares. Unfortunately (and this seems quite unfair, if not in direct violation of some suitably imaginary SEC regulation), the $$$ investors use to pay for said shares are being restricted to the positive reals.
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