And there are alternatives to the way Wall Street is run now, other than adopting the system in Cuba. Creating a false dichotomy does not further your point; it only makes you appear ignorant.Originally Posted by EdWorkman
And there are alternatives to the way Wall Street is run now, other than adopting the system in Cuba. Creating a false dichotomy does not further your point; it only makes you appear ignorant.
This has been a hugely interesting thread to follow. Obviously, Ilford being privately owned has allowed them to pursue their market in their own way, or so it would appear from the outside. But although they have not had to worry about public investors, nor some of the more onerous regulations that publicly traded companies face, I would be willing to bet that they still have to convince their bankers that they are doing the right thing from time to time.
Personally I feel that their present success actually has less to do with their being a private or public company, and more to understanding their customer and their market, their commendable attention to building a consistent and reliable product for their customers, and working hard to keep their customer base satisfied by communicating with them on a regular basis. They have managed to stay focused on producing a few, good products, and refused to over reach.
Being primarily interested in my own welfare (in other words I am interested in continuing to be able to use a quality product) I sincerely hope that they are able to continue with this successful formula.
If anyone from Ilford is reading this, congratulations on your recent success and thank you very much for continuing to support this small, niche market. Although I am not wealthy, nor am I a professional photographer, I will continue to support you in my own small way.
Thanks.
The Viewfinder is the Soul of the Camera
If you don't believe it, look into an 8x10 viewfinder!
Dan
Good for you. You are on the inside, but audit standards are quite different than what it takes for a small company in a stable, niche market to attract strong stock sales.
1. Wall Street is not monolithic. Some in Wall Street take a larger view, and others grab their cash and run. Large traders will generally not be interested in a thinly traded small cap, simply because they can't buy enough to move the needle on the 10-billion-dollar fund that they manage, or persuade their favorite whales to make a big purchase. Big companies can lose billions, because they have billions to lose, though it's frankly nutty to think that the stock price isn't affected. Analysts look at the fundamentals, sure enough. But not everyone in the public market is an analyst. Ernst and Young is a good auditing firm--they always did our audits and we were also squeaky clean and a solid performer. But I watched our stock prices vary from $12 a share to a buck and a quarter (it's at a buck and a half now), with no relationship whatsoever to the fundamentals. When a stock only trades a few thousand shares a week, someone, particularly an insider, making a big sale can spook the market, and someone making a big buy can double the price of it in a day.
2. Most of the people who attended our quarterly financial calls hung up after we went through the P&L. Sure, they want to know about debt and about accounts receivable, so they look at the balance sheet, too. But the point is that their focus is on the quarterly report with small caps. The reason is simple: A big company can lose billions and still have mountains of assets. A small company can be sunk by one project that turns bad, or one IP lawsuit they weren't expecting. That's why those investors look for big returns--it's what offsets that risk. I did not say that was wrong, just that it was true.
3. Big publicly held companies should certainly be subject to fair regulation. When I did say otherwise? But that does not mean that a small company is wise to subject itself to that level of regulation. Companies that act like General Motors (to harken back to a day when GM was the biggest corporation in the world) rarely become big--they bury themselves in process. GM wouldn't have become big if they acted when they were small like they did once they got big. We regularly competed against another company who cornered the market on a certain type of analysis by deciding to lose money on a long series of research projects, which made them the leading expert in that area. That was a decision they could make in five minutes--they could put all the owners in one room and ask them, and no further documentation is required. If the project came down to cost, as it often does in that domain because public money is involved, we'd lose. Remember, the purpose of all that regulation is to protect outsider investors, particularly those in the public who bought on the open market. If all the owners are insiders, they know the risks they are taking. Sure, partners screw each other all the time, but we aren't talking about bad actors, we are talking about what makes sense for good actors, as we assume Harman to be.
4. When our company went public, we did not get a huge injection of cash. We did provide a mechanism by which our investors could convert their investment into cash if they wanted to, and we provided a way for employees who had been granted stock options to exercise them. And we went public when it was good to go public--for certain types of companies (such as those making 35% per year, as Bear Stearns, our market adviser, told us--well before 2007 of course). We did get investment from some hedge funds, and they got a seat on the board in return for it. Thus ended agility. We eventually did fund the business plan and the company is still a good performer. It has been pretty consistently profitable and has grown at a reasonable pace. But the stock price still a buck and a half--12% of what it was when we were privately held.
I was not making a moral judgement, and you are showing your bias when you do. I was simply stating that small companies like Harman/Ilford (which is half the size of my former employer) are better off not being publicly traded, and what I saw in their report would probably not attract much investment in any case.
Rick "who has lived this first-hand, but from the other side of the street than where you sit" Denney
Absolutely right. The thing to remember is that when a company is publicly traded or even widely invested in the private equity market, they have two sets of customers: Those who buy what they make, and their stockholders. And it's the latter group that runs the board, if the principal isn't a majority owner. CEO's are usually hired to impress and manage the second set of customers, often without knowing anything about serving the first set. Examples abound.
Rick "happy that Harman can just focus on one set of customers" Denney
Joe,
Minor correction...
I worked at PwC in the management consulting practice at the time of the Enron meltdown, and seem to remember in that and the other examples you note, the issue was not that there were insufficient rules and regulations in place, BUT that they were not followed...
There was in some cases, major games played in accounting rules that hid expenses, hid risks, had revenues allocated to the wrong period (i.e. moved forward), etc....
Certainly not the finest hour for any of the players involved, including the late Arthur Anderson accounting firm...
The public company funded the industrial revolution, colonial exploitation, brought us railways, cars and aeroplanes, etc. Without them we would all be living in mud huts and wealth would be concentrated in far fewer hands than it is now. The problem is not public companies, Polaroid is a public company that once did great things, Apple too, can you imagine a privately held company building airliners and other very complex and capital intensive machines. The problem is with the expectations of spoiled, greedy investors who have become accustomed to making a quick buck during the boom in share prices since the fifties but specially since the eighties, and nowhere more so than in the US.
David Cary
www.milfordguide.nz
But, is film going to be around for a few more years???
That's all I want to know.
Probably not. Almost 10 years ago people on photo.net were predicting film to be very hard to get within 3 years and pretty much gone in 5, so any time now it will be gone.
Maybe just a little bit of a "wise guy" answer there Rich.
I know, I know, nobody can say for sure. Just getting tired of worrying about it.
The problem is not with public funding, it's with public ownership.
The former does not require the latter.
Take banks for example.
When you deposit money in a savings account you don't gain partial ownership of the bank.
Public corporations could work the same way, which would restore the long-term focus to
producing quality goods, growing the business, and satisfying customers. These are the
goals of privately-held corporations.
My wife worked for a telecom company that was owned by a European woman, one of the
richest women in the world. It was an excellent company to work for, with good salary and
benefits, strong emphasis on quality, and extremely high ethical standards.
The current situation, with stockholders owning the business, focuses strictly on short-term
returns and couldn't care less about anything else. They don't match the characteristics
described above. All they care about is profits, and big bonuses for executives.
- Leigh
If you believe you can, or you believe you can't... you're right.
Posting Permissions
Reply With Quote
Bookmarks