2%6(59$7,216²3(08/7,3/(

     

,ZLOOGHYRWHWKLVSLHFHWRWKHGDUOLQJ¶QXPEHU·RIPRVWLQYHVWRUV«WKH3(5DWLR,WLVDSUHWW\ ORQJRQHZKHUH,ZLOOZULWHRQZKDWWKH5DWLRPHDQV«WRPH KRZRQHPD\FDXWLRXVO\XVHLW ZKHQ ORRNLQJ DW LQYHVWLQJ LQ D FRPSDQ\ , ORYH WR JHW GUXQN RQ 0DWKHPDWLFV  +XPDQ 3V\FKRORJ\  HYHQ WRGD\ DP WU\LQJ WR ILQG DQ DQVZHU WR WKH UDWKHU HOXVLYH TXHVWLRQ RI ZKHWKHUWKHODWWHULQIOXHQFHVWKHIRUPHU«RUWKHIRUPHU«WKHODWWHU,QLWLDOO\,WKRXJKW,ZRXOG WU\ NHHSDVPXFKRI0DWKHPDWLFVRXWRIP\ZULWLQJVDVSRVVLEOHEXWWKHWHPSWDWLRQVDUHWRR VWURQJ WR UHVLVW , ZLOO GLUHFWO\ GLYH LQWR WKH 0DWKHPDWLFV SDUW ILUVW«VR WKDW LI \RX DUH ERUHG \RX PD\ OHDYH WKLV SLHFH PLGZD\ :H ZLOO DOVR VHH KRZ +XPDQ 3V\FKRORJ\ LV D EXQGOH RI FRQWUDGLFWLRQVDVZHJRWKURXJKWKHSLHFH«   1RW VR ORQJ DJR ZKHQ , ZHQW DERXW EX\LQJ P\ ILUVW VWRFN , QRWLFHG WKDW WKH 3( RU 3ULFH(DUQLQJV  5DWLR IRU VRPH FRPSDQLHVVHFWRUV ZHUH KLJKHUORZHU WKDQ RWKHUV 7KH DQVZHU WR WKLV FDOOHG IRU D UXGLPHQWDU\ XQGHUVWDQGLQJ RI VWRFN SULFHV ZKDW WKH\ VWRRG IRU  ZKDW PRYHGVWRFNSULFHVLQWKHORQJUXQ  7KH VWRFN SULFH DW DQ\ SDUWLFXODU WLPH DV PRVW SHRSOH NQRZ UHIOHFWV WKH ¶H[SHFWDWLRQ· WKDW LQYHVWRUV KDYH IURP WKH FRPSDQ\ LQ WKH FRPLQJ SHULRG V  :KDW LV WKH ¶([SHFWDWLRQ·" 7KH ¶([SHFWDWLRQV· EURDGO\VSHDNLQJDUH LQ WHUPVRI WKH FRPSDQ\·V¶(DUQLQJV·  ¶'LYLGHQGV·0RVW LQYHVWRUV  , VWUHVV WKH WHUP EX\ D FRPSDQ\ IRU LWV H[SHFWHG IXWXUH (DUQLQJV  SUREDEOH 'LYLGHQGV $W WKLV PRPHQW LI KHDU VRPHRQH DVNLQJ PH ´:KDW KDSSHQV ZKHQ WKHUH DUH QR (DUQLQJV 'LYLGHQGVµ"7KDWZLOOFRPHODWHU   0RVW SHRSOH DVVRFLDWH 5HWXUQ ZLWK &DSLWDO $SSUHFLDWLRQ RI D VWRFN :KLOH WKLV LV QRW DOO WKDW ZURQJ WKH &DSLWDO $SSUHFLDWLRQ PD\PD\ QRW UHIOHFW WKH ¶WUXH· *URZWK 3RWHQWLDO RI D FRPSDQ\ , ZLOO WU\  SHHU WKURXJK WKH VXUIDFH WR VHH ZKDW ¶5HWXUQ· DQ LQYHVWRU FDQ H[SHFW JLYHQDFRPSDQ\·VVWDWHDWDQ\SRLQWLQWLPH  ,I,ZHUHWRH[SUHVVWKH7RWDO5HWXUQWKDW,FRXOGH[SHFWIURPDVWRFNZKDWZRXOGLWEH":KHQ, LQYHVWLQDFRPSDQ\,DPORRNLQJDW*URZWKQRGRXEWEXWWKHUHLVDOVRDUDWKHU¶VLOHQW·IULHQG LQWKHQDPHRI'LYLGHQG<LHOG PDWKHPDWLFDOO\WKLVLV'LYLGHQG3HU6KDUH3ULFH3DLG3HU6KDUH H[SUHVVHG DV D SHUFHQWDJH  7KH 7RWDO 5HWXUQ , PDNH IURP D VWRFN LV VLPSO\ D VXP RI WKH *URZWK WKH'LYLGHQG<LHOG  3XWWLQJDOOWKH(QJOLVK,ZURWHLQWKHODVWSDUDJUDSKLQRQHOLQHZHKDYH  7RWDO5HWXUQ *URZWK'LYLGHQG<LHOG  7KLV LV ZKDW , ORYH DERXW 0DWKHPDWLFV RQH FDQ OXFLGO\  HFRQRPLFDOO\ H[SUHVV RQHV WKRXJKWV ZLWKRXWZDVWLQJ¶(QJOLVK· ¶7UHHV·   8VLQJ1RWDWLRQV,ZULWHWKHDERYHDVIROORZV  

.  J' 3  $  
0  

:KHUH 

. LVWKH5HTXLUHG5HWXUQIURPWKH,QYHVWPHQW JLVWKH6XVWDLQDEOH*URZWK5DWH HODERUDWHGEHORZ  ' 3 LVWKH'LYLGHQG<LHOG
0   

+HPDQW6UHHUDPDQ

2%6(59$7,216²3(08/7,3/(      

:+$7,6¶J·"  6XSSRVH,HDUQ5VDVP\1HW3URILW GHFLGHWR¶5HWDLQ·DOORIWKLV LQYHVWLWEDFNLQWRP\ EXVLQHVV  )XUWKHU DVVXPH WKDW P\ 5HWXUQ RQ (TXLW\ RU 52( ZKLFK WHOOV DQ LQYHVWRU KRZ PXFK 5HWXUQ D FRPSDQ\LVJHWWLQJRQWKHLQYHVWRU·VPRQH\ ODVW\HDUZDV  ,I , QRZ LQYHVW WKH ¶5HWDLQHG· 5V DW ODVW \HDU·V 52(   DW WKH HQG RI WKH QH[W \HDU , VKRXOGHQGZLWK5V [   %\ GRLQJ VR , KDYH PDQDJHG WR ¶JURZ· P\ 1HW 3URILW IURP 5V WR 5V E\ ¶5HWDLQLQJ· DOO WKH3URILWV LQYHVWLQJLWLQWRP\EXVLQHVVWRJLYHPHD*URZWK5DWHRI  1RZ ZKDW KDSSHQV LI , GHFLGH WR ¶5HWDLQ· RQO\  RI P\ 1HW 3URILW  ¶3D\RXW· WKH UHVW WR VKDUHKROGHUVLQWKHIRUPRIDGLYLGHQG"6LPSOH,UXQWKURXJKWKHHDUOLHUPDWKDJDLQWRILQGWKH ¶J·EXWWKLVWLPHLQVWHDGRIWKH5V,ZLOOXVH5VZKLFKLVZKDWLV¶5HWDLQHG·DIWHUSD\LQJ WKH'LYLGHQG,QWKLVFDVHWKH¶J·ZRUNVRXWWR  6R ZH VHH WKDW D FRPSDQ\·V 6XVWDLQDEOH *URZWK 5DWH ¶J· GHSHQGV RQ  IDFWRUV WKH 5HWHQWLRQ 5DWLR  WKH 52( :H ZLOO QHHG PRUH RI WKLV QXPEHU D OLWWOH ODWHU ZKHQ \RX ZLOO QRWLFH WKDW HYHU\WKLQJVWDUWVPDNLQJLQWXLWLYHVHQVH   1RZLIZHZLOOSOD\DURXQGZLWK $ WRVHHZKDWZHWXUQXSZLWK  

.  J' 3
0  



3 
 

'  . ²J  
0

,I,QRZGLYLGHERWKVLGHVRI % ZLWK(OHWVVHHZKDWKDSSHQV  

3 ( 

' (  . ²J  %  
 0 

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

+HPDQW6UHHUDPDQ

2%6(59$7,216²3(08/7,3/(     

FRPSDQ\·V VWRFN WKDW DQQRXQFHV D FXW LQ 'LYLGHQG :K\ GRHV WKLV KDSSHQ" 7KH HTXDWLRQ SURYLGHVWKHDQVZHU  ,I WKH 1XPHUDWRU JRHV GRZQ ZLWK WKH 'HQRPLQDWRU EHLQJ FRQVWDQW WKH 5DWLR DOVR JRHV GRZQ ,I WKH 'LYLGHQG 3D\RXW JRHV GRZQ WKH 3( DOVR JRHV GRZQ WKHUHE\ SXOOLQJ GRZQ WKH VWRFN SULFH  $ORRNDWWKHHTXDWLRQDOVRWHOOVXVZK\ZHVHHDIDVWJURZWKFRPSDQ\FRPPDQGLQJD+LJK3( ,QIDVWJURZLQJFRPSDQLHVWKH¶J·LV+LJK:K\")DVW*URZWKFRPSDQLHVWHQGWRKDYHKLJK52( GXHWRZKLFKWKH¶J·LVKLJK J 5HWHQWLRQ5DWLR[52(   1RZ LI WKH 1XPHUDWRU LV KHOG FRQVWDQW ZH VHH WKDW DV ¶J· ULVHV WKH 'HQRPLQDWRU VKULQNV 5HVXOW"7KH3(5DWLRULVHV ZLWKLWWKH6WRFN3ULFH  7KH PDUNHW LV ZLOOLQJ WR SD\ D SUHPLXP IRU WKH JURZWK  KHQFH WKH 3( WHQGV WR EH KLJK <RX ZRXOGKDYHQRWLFHGWKDWWKH'LYLGHQG 3D\RXW  WKH5HWHQWLRQ5DWLRFRXOGQ·WERWKJRXSDWWKH VDPH WLPH 0RVW *URZWK FRPSDQLHV WHQG WR KDYH /RZHU 3D\RXW 5DWLRV WKDQ 5HWHQWLRQ 5DWLRV 7KLV FDQ EH DWWULEXWHG WR WKH IDFW WKDW WKH\ QHHG WKH PRQH\  WKH\ KDYH HQRXJK DYHQXHV WR LQYHVWWKHPRQH\DWDJRRGUDWHRIUHWXUQ  7KHVXEVFULSWVWDQGVIRUWKH¶([SHFWHG·QXPEHU¶QH[W·\HDU6RWKH3(LQWKHHTXDWLRQJLYHV XV WKH ¶([SHFWHG· 3( JLYHQ DQ H[SHFWHG 'LYLGHQG 3D\RXW  *URZWK 5DWH 7KLV LV FRQVLVWHQW ZLWKWKHYLHZWKDWVWRFNSULFHVUHIOHFW¶([SHFWDWLRQV·UDWKHUWKDQZKDW·VKDSSHQHGLQWKHSDVW  7KLVZULWHXSLVE\ QRPHDQVH[KDXVWLYH7KHUH DUH ORWVRI RWKHU WKLQJV WKDW JR LQWRWKH3(DV ZHOO EXW WKLV PRGHO JLYHV XV DQ LQWURGXFWLRQ WR PDWKHPDWLFDOO\ ¶VHH· WKLQJV , ORYH PDWKHPDWLFV   7KH HTXDWLRQ DOVR JLYHV XV DQ LQVLJKW LQWR ZK\ WKH 3( IRU &\FOLFDOV IOXFWXDWH GHSHQGLQJ RQ ZKHUHWKHF\FOLFDOLVLQWKH¶F\FOH:KHQWLPHVDUHEDGWKH¶J·ZLOOEHORZ LIWKHFRPSDQ\LV &DVK5LFK LW PLJKW XS WKH 'LYLGHQG 3D\RXW +RZHYHU WKH  WHUPV RQ WKH ULJKW VLGH RI WKH HTXDWLRQDGMXVWLQDZD\ZKLFKNHHSVWKH3(ORZ« KHQFHWKHVWRFNSULFHV  :KHQWLPHVWXUQIRUWKHJRRGWKH¶J·PRYHVXS IRUWKHPRPHQWDVVXPLQJWKH.0LVFRQVWDQW WKH GHQRPLQDWRU VKULQNV DJDLQ WKHUHE\ SXVKLQJ XS WKH 3(«  KHQFH«ZHOO E\ QRZ \RX NQRZ ZKDW   :+$7,)7+(5($5(12($51,1*6«25',9,'(1'6"  6LPSOH7KHPRGHOEUHDNVGRZQ  :H QRZ QHHG WR UHVRUW WR RWKHU 9DOXDWLRQ PRGHOV OLNH WKH 'LVFRXQWHG &DVK )ORZ 9DOXDWLRQ WR JLYHXVDQLGHDRIWKH¶IDLU·YDOXH7KHVDPHKROGVIRUFRPSDQLHVWKDWGHFODUHQR'LYLGHQGV,Q WKLV FDVH WKH HTXDWLRQ JLYHV XV D  ZKLFK LV SUHWW\ PXFK ULGLFXORXV $ )DVW *URZWK FRPSDQ\ PD\SD\QRGLYLGHQGLQLWVHDUO\\HDUVDVLWQHHGVDOOWKHPRQH\IRUJURZWK  )RUFRPSDQLHVWKDWSD\QRGLYLGHQGWKHPDUNHWV¶H[SHFW·WKHPWRSD\DGLYLGHQG¶VRPHGD\·  WKDWLVZKDWPRYHVSULFHV  «:KLFKEULQJVPHIDFHWRIDFHZLWK3V\FKRORJ\ 

+HPDQW6UHHUDPDQ

2%6(59$7,216²3(08/7,3/(      

35(',&7%,/,7<"  :H KXPDQV E\ QDWXUH SXW D SUHPLXP RQ 3UHGLFWDELOLW\ 1RW RQO\ LQ OLIH EXW DOVR LQ WKH FRPSDQLHVZHZDQWWREX\6RZKHQZHORRNDWDFRPSDQ\DVDSURVSHFWLYHEX\ZHWU\ ORRN DW WKH IDFWRUV WKDW ZH FDQ ¶SUHGLFW· SUHWW\ ZHOO 2QFH ZH DV D JURXS PDQDJH WR SUHWW\ PXFK DJUHH RQ RXU ¶SUHGLFWLRQ· VR WKDW ZH KDYH D ¶FRQVHQVXV· ILJXUH ZH DUH UHDG\ WR SD\ D ¶SUHPLXP· IRU WKDW FRPSDQ\ 7KDW LV RQH UHDVRQ IRU WKH +LJK 3(V RI 6RIWZDUH FRPSDQLHV ZKLFKWUDGLWLRQDOO\KDYHIROORZHGD¶WKLVLVRXUQH[W\HDU·VJXLGDQFH·SKLORVRSK\1HYHUPLQGLI WKH¶JXLGDQFH·LVRIIWKHPDUN,IWKHJXLGDQFHLVJRRGWKHPDUNHWVUHZDUGWKHPE\XSSLQJWKH SULFHV  7KH VDPH PDUNHW EHDWV WKH SULFHV GRZQ LI XQIRUWXQDWHO\ WKH ¶JXLGDQFH· LV ¶JXLGHG· GRZQ  7KLQJVDUHQ·WWKDWVLPSOHDOZD\V3HRSOHZHUHEX\LQJOLNHKHOOLQWR0LFURVRIWLQWKHGD\VLWZDV SD\LQJ QR GLYLGHQG 7KH SULFHV ZHQW XS ,Q VXFK FDVHV WKH PDUNHWV ¶H[SHFW· WKHP WR SD\ D GLYLGHQG ¶VRPH GD\·  WKDW LV ZKDW PRYHV SULFHV &ORVHU KRPH %KDUWL 7HOHYHQWXUHV LV DQ H[DPSOH  :KDW LV WKH ¶5LJKW· SULFH LV LQGHHG GHEDWDEOH  LW·V YHU\ VHOGRP WKDW WZR SHRSOH DJUHH RQ WKH SULFH ,W DPD]HV PH KRZ GLIIHUHQW SHRSOH FDQ WKLQN ZKHQ LW FRPHV WR D VWRFN SULFH ,Q JRRG WLPHV SHRSOH NHHS EX\LQJ WKHUHE\ XSSLQJ WKH 3( UDWLR 7KH SULFHV XS PDUNHW PRYHV XS  PRVW IHHO WKDW WKH JRRG WLPHV ZLOO ODVW IRUHYHU 7KLV FDXVHV WKHP WR MXVWLI\ KLJK 3( RQ VRPH EDVLVRUDQRWKHUWKHUHE\WDNLQJSULHVWRVWUDWRVSKHULFOHYHOV  3HRSOH VWDUW ORRNLQJ DW ¶5HODWLYH· YDOXDWLRQ  EX\ WKH FRPSDQ\ WKDW ILJXUHV RQ WKH ORZHU HQG FRPSDUHG WR WKH ¶6HFWRU 3(·  ODXG WKHPVHOYHV IRU ILQGLQJ ¶D JUHDW EX\· 1HYHU PLQG LI WKH HQWLUHVHFWRULVLWVHOI¶RYHUYDOXHG·:KRLVFRUUHFW"(YHU\RQH7KDW·VZKDWWKHPDUNHWVEHOLHYH LQ   7KLV ILQDOO\ EULQJV PH WR P\ XQDQVZHUHG TXHVWLRQ RI ZKHWKHU 0DWKHPDWLFV LQIOXHQFHV +XPDQ EHKDYLRURUYLFHYHUVD  $V ZH VDZ 0DWKHPDWLFV EHDXWLIXOO\  OXFLGO\ H[SODLQV ZK\ SULFHV PRYH JLYHQ D VHW RI ¶QH[W \HDU· H[SHFWDWLRQV EXW KRZ PDQ\ SHRSOH NQRZ DERXW LW" ,I , ZHUH WR WKUXVW WKH HTXDWLRQ RQ VRPHERG\·V IDFH  WROG KLP WKDW 0DWKHPDWLFV LV FDSDEOH RI H[SODLQLQJ KLV EHKDYLRU KH ZLOO PRVW SUREDEO\ EDON DW PH +H ZRXOG WKLQN LW·V D QREUDLQHU 'LYLGHQG GRZQ SULFHV GRZQ HWF DOOWKLVLVORJLFDOZKDW·VWKHIXVVDOODERXW"  0D\EH %XW LW ILOOV P\KHDUWZLWKKDSSLQHVVWKDWD VLPSOHHTXDWLRQLVFDSDEOH RI H[SODLQLQJ WKH PDGQHVV DPRQJ SHRSOH LQ WKH PDUNHWV«  WR WKH VPDUW RQHV LW WHDFKHV WKHP KRZ WR FRQWURO WKHLURZQEHKDYLRU  

´+RSH«FDQ·WVXEVWLWXWH5HDVRQµ

+HPDQW6UHHUDPDQ

Sign up to vote on this title
UsefulNot useful