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Dear herd,

JMLS, I may not understand the point you are making here. I didn't think stock price was (short term) indicative of anything related to management or operations success. Can you make a simple explaination to bring me on board?

The quoted stock price each day indicates how much the market will pay for a piece of a company, in cash. JDSU made its purchase of SDL for stock. The point is that it is often said that the value of the shares on the day of purchase doesn't represent true invested capital; but purchasing a company with stock is equivalent to selling shares at the current market price, then buying the other company with cash. We would consider a cash purchase to be true invested capital.

While the stock price doesn't necessarily reflect management or operating success, a high stock price does help acquisitive companies. Issuing stock for purchases is real capital invested (even if it isn't cash); we need to reflect this somehow.


Lleweilun Smith
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