Expect a lot more takeover activity supporting equities.

Forces are stacked against ‘normal’ shareholding, as management is incented to dilute shareholders as previously discussed, and as repeatedly demonstrated during the last 6 months via dilutive converts, etc.

By taking over the entire company, that risk goes away.

This means that since public companies trade cheap enough for shareholders to own, that price will be cheap enough to make takeovers attractive.

Expect this bit of institutional structure to result in a new, massive, round of takeovers/consolidation.


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2 Responses

  1. as management is incented to dilute shareholders as previously discussed
    I missed this. Are there any white papers on this?

    Any sectors in particular you see as more likely to be affected?

  2. No, just some short comments I made after the early capital injections to Countrywide and Citibank.

    Haven’t looked into it.

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