28
Aug
2009
Bank loans are taken out and bonds are issued
Highly public maneuvers can dilute your interests as well. Bank loans are taken out and bonds are issued, taking control of the company away from you and granting it to bankers and the whims of the bond market. New shares issues are sold to the public, diluting your stake. Mergers and acquisitions of other companies further dilute your power and tighten the hold of management over your earnings.
Investor relations departments are set up to divert your attention from what is really going on and to placate your reaction. Companies often buy back their own shares, indicating that this will increase your ownership interest. What is really going on is that your interest is transferred elsewhere.
Bought-back shares are placed in employee stock ownership plans or financed by bonds and bank loans. When it is all over, employees and lenders own more of the company and you own less.
Ask yourself: How does all this makes me feel? You may feel betrayed or abandoned. Your broker or financial planner never mentioned the fact that simply buying stock is likely to make a sucker out of you. Certainly, a sense of unmanageability begins at this level.