OT: Re: US IT jobs going overseas creating 'IT Rust Belt'.
Lucas Peet
sirsky at lucastek.com
Tue May 13 03:56:02 CDT 2003
Wow. Now THAT is some cool stuff...
-Lucas
At 10:17 PM 5/12/2003 -0500, Charles Steinkuehler wrote:
>It really did "vaporize", but you first have to realize that it also
>materialzied overnight, too.
>
>Not quite kindergarten scenerio, but hopefully not too hard to follow:
>
>- Seatle Joe forms WigiCorp, a trend-of-the-minute high-tech startup.
>
>- With a couple ideas scribbled on the back of a coctail napkin, Joe gets
>enough money from venture firms to put up a website and hire lawyers to
>structure an IPO.
>
>- WigiCorp "goes public", selling 10% of the company for 10 million
>dollers (or $10 a share at the IPO offering price). This puts the public
>value of WigiCorp at $100 mil.
>
>- You were "lucky" enough to get in on the ground floor, and have 100
>shares at the IPO offering price of $10 (for a $1000 total investment, and
>a whopping 0.001% ownership stake in WigiCorp).
>
>- At this point, you go on a vacation to the bahamas or something, and
>stop reading the financial reports :-)
>
>- 6 months later, you return from your trip(s) abroad, and find WigiCorp
>stock is now worth $100 a share (total company valuation of $1 Bil, and
>your $1000 investment is now worth $10,000).
>
>NOTE: The share price reflects the price a buyer and seller agree on for
>a specific sale. While in the normal world this should reflect the true
>market value of a company, in thinly traded stocks, or in situations where
>investors are acting irrationally (ie everyone's trying to jump on board
>the hotest/latest trend), prices can get disconnected from reality. If
>one moron...er investor is willing to pay $1000 a share for one share of
>WigiCorp stock (instead of the "going" rate of $100), the *ENTIRE*
>WigiCorp company (and all it's existing shareholders) get a 10X "virtual" gain.
>
>Let's be clear about that...someone else paid more money than you did for
>something you bought, which makes it more valuable. You do not gain (or
>loose) any money until you actually sell the stock you bought. Although
>it's possible in today's world to borrow against unrealized gains, invest
>on margin, live off your credit card and purchase stock with your
>paycheck, and other complex transactions, we're ignoring these for the
>sake of this discussion. Generally, however, if your $1000 investment
>turns into something valued by the market at $10,000 or $100,000, you're
>going to be feeling pretty good, and probably eyeing that new
>car/house/girlfriend/whatever.
>
>- Encouraged by the performance of your portfolio, you leave on another
>extended trip abroad...
>
>- When you return, WigiCorp stock has crashed. It is now worth only
>$0.10, and is about to be delisted. You have not "lost" any money (that
>only happens when you sell the stock), but WigiCorp has gone from a market
>valuation of $100 Mil (when you bought at the IPO) to $1 Bil (at
>$100/share) to a valuation of $1 Mil (likely the auction value of their
>Aeron chairs, pool-table, and video games), and your initial investment of
>$1000 has see a high "potential" value of $10,000, and is now worth a
>"potential" $1. Of course you won't know the *ACTUAL* value of your
>investment until you actually sell it and see what someone is willing to pay.
>
>It's pretty easy to become a "paper millionare"...just create a company
>structure, declare a few million shares stock (let's say 5 million), and
>sell a share or two to your parents / wife / girlfriend /
>high-schoool-buddy for $1 each. Presto, you're the 99+% owner of a
>company valued at 5 million dollers, putting your personal net worth at
>$4,999,996 minus however much you're upside-down on your car loan
>(assuming you sold one share each to the above groups...just don't let
>your wife or girlfriend get ahold of the shareholder list!). Of course,
>if you try to sell a million shares for a million dollers, you might have
>a much harder time of it!
>
>The engineering types I know familiar with statups call these "j-dollers"
>or "i-dollers" (depending on whether you're preference is i or j for the
>square root of -1), signifying their imaginary nature. Only when you sell
>something for cold-hard cash do you get "real" money.
>
>So...it's actually pretty easy to wave the "magic wealth creation wand",
>and even easier to see the whole mess disappear into the thin air from
>whence it came.
>
>--
>Charles Steinkuehler
>charles at steinkuehler.net
>
>
>
>
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