Re: How about a new SEC disclaimer and better use of cash in mature companies

AZDuffman wrote:
On Apr 12, 6:31 pm, "Andy F." <never.m...@xxxxxxxxx> wrote:
"AZDuffman" <srduffy1...@xxxxxxxxx> wrote in message

news:57ed806b-a6e7-46b0-9aac-81ea1f2642d7@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx



Growth--that is the mantra. Years ago, 10% was tearing it up. Then a
Microsoft or Apple comes by and blows that away because they are in
a rare-"superboom" industry. So money flows into them and away from
a GM. So GM buy unrelated companies from Ross Perort and Howard
Hughes and loses their focus. Or they get into the mortgage
businesss and eventually lose a bundle.

So how about this idea? The SEC lets or even in certain situations
requires companies to make a statement like, "The current industry
this company is involved in is substantially mature. At this time,
the company will have prospect of incramental growth, but not of an
amount well beyond inflation, GDP, and population levels. Therefore,
the management feels that the best use of excess capital is to
stregnthen the company by reducing debt; remain as cash to ensure
stability in future economic downturns; and return to shareholders
by buying back stock or/and divadends in the most tax-efficient
manner."

Now, if a company came right out and said that, I feel they would
first attract "income" investors and second be able to tell
investors, "Hey, we said right off it was not about big growth."
Wouldn't this lessen the pressure to make stupid acquisitions?

You seem to be assuming that the SEC knows what firms like GM should
be doing better than the businesses themselves.

In fact hardly anyone - not even the wise and wonderful people in the
government - guessed that the demand for new cars would suddenly
collapse like it has in the last year.- Hide quoted text -

That is not what I am saying at all. What I am saying is that in pursuit
of "growth" companies make stupid acquisitions. Why not let the SEC
give them an "out" to say, "hey, we are a mature business and our cash
will go to the stockholders directly" without being sued or big proxy fights?

That happens right now. Most dont choose to go that route when cash is very tight.


.

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