Biggest crash in stock market history?

Patrick said:
hey @clarkenstein - when a corp officer exercises options above the strike price, where do the shares come from?
capital stock?
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So when the shares are issued, the shares are moved from the company plan, which already has a pool of shares set aside for it. Those shares are approved by the Board (usually the compensation committee). You can read what shares have been set aside in the annual proxy statement which is a mandatory filing for every publicly traded company. Go to the SEC Edgar system and start with the document “DEF-14A”. That will outline all kinds of juicy stuff - including total executive comp.

The entry hits stock and APIC on the one side, and depending on vesting it either ends up in a deferred comp (to balance the balance sheet) and expense is recognized over the vesting requirements or just goes straight to expense. You would use a Black Scholes model to get the fair value and proper expense amounts.

For performance based awards, same basic deal, except you would most likely use a Monte Carlo valuation model vs Black Scholes. PSUs suck to account for. If anyone wants to make a bundle, figure out a way to have a system automatically account for PSUs and the multitude of vesting possibilities compensation experts can come up with. It’s a big need in the accounting world.
 
I know this reporting stuff is not sexy - but if you really want to peek behind the curtain of a company, these filings have that info. Figured I would share an example.

Here is an example of what I was talking about (DEF-14A):


First the fun stuff -

Check out page 44. Then look at page 49. If you do the math on the Celgene acquisition that occurred not too long ago, you’ll see how well these folks did on that. One line of shares on some of those tables would be plenty for most people. You’ll also see how equity really plays into compensation at those high levels. Hell, any level.

Now the administrative stuff -

Page 21 explains what @Patrick was asking about - who decides comp, how it works, the equity (incentive) plan. More high level governance than nitty gritty details, but the accounting rules are referenced throughout the doc.

Then go here -


Start on the bottom of page 93 - Note 14. Explains the stock plan in detail. How it works, how the shares got in the plan, and who authorized it. Plus how many shares are leaving the plan annually and how much the grants cost the company in expense. It also explains how this is affecting EPS.

It’s not exciting, but I think it’s important to know it’s out there. When people say to do your due diligence, IMHO, this stuff should be read. Or, you can leave it to the experts who do that as their day job. Analysis of charts is only part of the story, and a lot of that is looking for patterns - that doesn’t really give you information on how a company is actually operating and their guidance for upcoming years. Also, when people freak out over CEO comp in the news, you’ll see the salary usually isn’t driving the high numbers - it’s company performance and the related rise in equity.

This is just one company that used to be out there. If a company is traded on the open markets this info is out there for everyone to see.
 
clarkenstein said:
I know this reporting stuff is not sexy - but if you really want to peek behind the curtain of a company, these filings have that info. Figured I would share an example.

Here is an example of what I was talking about (DEF-14A):


First the fun stuff -

Check out page 44. Then look at page 49. If you do the math on the Celgene acquisition that occurred not too long ago, you’ll see how well these folks did on that. One line of shares on some of those tables would be plenty for most people. You’ll also see how equity really plays into compensation at those high levels. Hell, any level.

Now the administrative stuff -

Page 21 explains what @Patrick was asking about - who decides comp, how it works, the equity (incentive) plan. More high level governance than nitty gritty details, but the accounting rules are referenced throughout the doc.

Then go here -


Start on the bottom of page 93 - Note 14. Explains the stock plan in detail. How it works, how the shares got in the plan, and who authorized it. Plus how many shares are leaving the plan annually and how much the grants cost the company in expense. It also explains how this is affecting EPS.

It’s not exciting, but I think it’s important to know it’s out there. When people say to do your due diligence, IMHO, this stuff should be read. Or, you can leave it to the experts who do that as their day job. Analysis of charts is only part of the story, and a lot of that is looking for patterns - that doesn’t really give you information on how a company is actually operating and their guidance for upcoming years. Also, when people freak out over CEO comp in the news, you’ll see the salary usually isn’t driving the high numbers - it’s company performance and the related rise in equity.

This is just one company that used to be out there. If a company is traded on the open markets this info is out there for everyone to see.
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Exactly why 90% of my trades are technical analysis. My brain likes charts/patterns/volumes and using mental stop losses. Thanks for the info. Interesting to learn about but how do you read that stuff if your aren’t passionate about it?
 
soundz said:
All I do is keep my shit in whatever I have it in and all it does is go up.
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That's what I did for fifteen years, but now I'm trying to make that money go up more bigly-er so I can hopefully retire soon. I've been really enjoying learning and playing around, though I'll probably not enjoy it as much when I start losing more and winning less.
 
JimN said:
That's what I did for fifteen years, but now I'm trying to make that money go up more bigly-er so I can hopefully retire soon. I've been really enjoying learning and playing around, though I'll probably not enjoy it as much when I start losing more and winning less.
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Start to dig into option trade management...just because your trade goes bad doesn’t mean you are going to lose. You can play defense. Also look into the Greeks and you’ll start to learn what the theoretical risk is before you place the trade and while you have the trade on.
 
Dave Taylor said:
Exactly why 90% of my trades are technical analysis. My brain likes charts/patterns/volumes and using mental stop losses. Thanks for the info. Interesting to learn about but how do you read that stuff if your aren’t passionate about it?
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All about the mindset - just look at it as understanding another piece of the pie. Corporate governance is really important as is disclosure.

Example: Instead of seeing on the news that an activist shareholder suddenly got into one of your investments throwing the stock into the realm of crazy volatility, you can see ahead of that. In the back of proxies, there are shareholder proposals. At the end of each proposal there is a statement that goes something like : the Board recommendation is to vote AGAINST this proposal OR the Board recommendation is to vote FOR this proposal

when you see that - the company is either being annoyed by some loony shareholder who got enough votes to put something up for shareholder votes... OR you just saw the first tremor of a major earthquake for the company if they say AGAINST. Someone (like Carl Icahn) is going to shake the tree down to the foundation with the proposal; one that can change the makeup of the board, or change the way they operate.

that is what a hedge fund looks out for. That’s one of the ways they start their play.

that is waaay ahead of charts. Just like watching option charts - it’s a disclosure that can go ignored, or you can use it as more information into those reading those charts. Sometimes the charts move first. Sometimes the disclosure moves first.

Risk factors - a required disclosure - can really let someone know if something is up. I worked for a company where the stock dropped 14% in one day on a change in risk factor disclosure.

more info is better. Watch the analyst reports closely. They can summarize this stuff if they choose to. Good ones do. They read it for you - give you the overview in a paragraph or two.
 
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cdrmtbiker said:
Start to dig into option trade management...just because your trade goes bad doesn’t mean you are going to lose. You can play defense. Also look into the Greeks and you’ll start to learn what the theoretical risk is before you place the trade and while you have the trade on.
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Yeah, I know a little about this so far. I ended up ordering that book you recommended, so we'll see how far I get into it.
 
JimN said:
Yeah, I know a little about this so far. I ended up ordering that book you recommended, so we'll see how far I get into it.
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Nice! Take your time going thru the book. It reads like a college text book. Any questions as you go thru it just give a shout.
 
I'm wondering if I'm going to start seeing a few young mountain bikers surprise retiring in the next few years.
 
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I started positions in cannabis a couple months ago based on my own speculation. WTF is happening lol

I should have spread my investments evenly than trying lean towards a winner. Shoulda woulda coulda
 
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THATmanMANNY said:
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I started positions in cannabis a couple months ago based on my own speculation. WTF is happening lol

I should have spread my investments evenly than trying lean towards a winner. Shoulda woulda coulda
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I can get you some tips from my son. His weed stocks are way up. He's itching to sell everything since he's more than doubled his money from waiting tables in a few months of investing.
 
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My huge winner lately has been NVAX. Up 2750%. Shame I didn't dump more than $100 into them when the pandemic hit.
 
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