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"The Ballmer Years" stock price graph is extremely misleading because the number of outstanding shares has changed. If they want to track Ballmer' performance t

by bgirard 13y ago

"The Ballmer Years" stock price graph is extremely misleading because the number of outstanding shares has changed. If they want to track Ballmer' performance they should graph market cap.

mbennett 13y ago
Also, since it attempts to show how much the values of the shares change, it should be adjusted with the dividends paid out during that time.
keithwinstein 13y ago
It depends on your perspective. If you're one of Microsoft's shareholders (the perspective the WSJ may be writing for), market capitalization is not directly relevant. If Jane owns 100 shares of ABCD that most recently traded at $10 apiece, and then the issuer issues 1,000 new shares to its employees but the shares continue to trade at the same price, the market capitalization has increased but Jane's stake hasn't changed in value. Shareholders do care about price return and dividends. They might also care about total return, subject to some reinvestment strategy and tax regime. Market cap is also problematic because it can't be calculated in real time. Reporting companies generally only publish a share count once a quarter. They publish two numbers: the gross count of shares outstanding on a particular day (which doesn't count in-the-money options and other live claims on a company's equity) and the fully-diluted share count averaged over the quarter (without publishing the strike price distribution of the options). Neither one is exactly what you'd need to calculate an implied whole-company market valuation anyway, so in general any attempt to measure market cap is necessarily going to get an uncertain, out-of-date, imperfect metric. (A useful one, don't get me wrong! But not what principally matters to the shareholders.)
- bgirard 13y ago
  That's a good point. Thanks!
Zigurd 13y ago
If dilution is a significant factor and you are sitting on a cash pile you can't possibly spend fast enough, then that's a problem with an obvious solution going unsolved.

by bgirard 13y ago

"The Ballmer Years" stock price graph is extremely misleading because the number of outstanding shares has changed. If they want to track Ballmer' performance they should graph market cap.

mbennett 13y ago

Also, since it attempts to show how much the values of the shares change, it should be adjusted with the dividends paid out during that time.

keithwinstein 13y ago

It depends on your perspective. If you're one of Microsoft's shareholders (the perspective the WSJ may be writing for), market capitalization is not directly relevant. If Jane owns 100 shares of ABCD that most recently traded at $10 apiece, and then the issuer issues 1,000 new shares to its employees but the shares continue to trade at the same price, the market capitalization has increased but Jane's stake hasn't changed in value. Shareholders do care about price return and dividends. They might also care about total return, subject to some reinvestment strategy and tax regime. Market cap is also problematic because it can't be calculated in real time. Reporting companies generally only publish a share count once a quarter. They publish two numbers: the gross count of shares outstanding on a particular day (which doesn't count in-the-money options and other live claims on a company's equity) and the fully-diluted share count averaged over the quarter (without publishing the strike price distribution of the options). Neither one is exactly what you'd need to calculate an implied whole-company market valuation anyway, so in general any attempt to measure market cap is necessarily going to get an uncertain, out-of-date, imperfect metric. (A useful one, don't get me wrong! But not what principally matters to the shareholders.)

bgirard 13y ago
That's a good point. Thanks!

Zigurd 13y ago

If dilution is a significant factor and you are sitting on a cash pile you can't possibly spend fast enough, then that's a problem with an obvious solution going unsolved.