Discussion in 'UPS Information Technology' started by Dfigtree, Nov 12, 2008.
Tell me again why UPS went public and how that benefited the shareholders.
Some people believe that going public with the stock was designed to benefit a narrow and select group of people. That would be:
1) the descendants of the founding fathers and;
2) the already millionaire retired or "about to retire" millionaire managers.
Going public sure wasn't designed to benefit the hourly, PT or FT, employee who buys a token quantity of stock through the payroll deduction program.
I had a rather revealing conversation with the Labor Relations Manager, at the time, about why, suddenly, the Thrift Plan was being dissolved and stock was being made available to the lowly hourly worker and the public.
His position was, "what would the public say if UPS took the employee's Thrift Plan money and then went "tits up" (his words, not mine)?
I said, "I don't know".
He said, "The public would say "look what that company did to those poor people"." (the hourly involved in the Thrift Plan)
He then said," what would the public say if the employees bought stock and the company went "tits up"?
I said, "I don't know". (being the dumb truck driver that I am)
He said, "The public would say, "that's the chance you take when you buy stock"."
Kinda scary isn't it?
I think the company knew that going public would bring more money in for use in investments, acquisitons and operations which, when translated, means "greed".
First off, I'm not a fan of UPS being public at all. I think there are a lot of negatives, and Jim Casey would have never approved.
However, I think the concept that going public was to benefit a small group of people is misguided. I don't care what a labor manager said or intended to say.
I got a chance to hear first hand from management committee members (including Eskew) why we went public and what they expected.
The concept was that stock is the currency of business and being private put us at a disadvantage UPS as a private company was not respected internationally.
We have made a tremendous amount of acquisitions. I personally think we could have done those as a private company, but that was not the belief of the management committee.
BTW, as I recall, some of the founding fathers' decesndents opposed the thought of going public. I think it was the family of George Smith, but I'm not sure about that.
I think both Trix and P-man have good points.
My take is that what P-man says was the intent.
And what Trix says is some "enterprising" (being nice) individuals benefited tremendously from from the IPO.
I don't think that the people that made the decision to go public foresaw all the many negative consequences and destructive impacts of going public.
If they knew what we all know now, I don't think we would be public.
To say that the currency of business is stock is an out and out misstatement. The currency of business is money. The corporate line that the currency of business is stock is deceptive. Look, if I have private stock and I want to buy your company, what are you going to prefer, a stock that is subject to market risk or one that moves only 4 times a year in a controlled fashion?
Because this "currency" thing is so unbelievable, you have to wonder why the PR department ever floated it and whether there are some things that have yet to be told.
Private stock is NOT subject to the same valuations as public stock. In the case of UPS, remember that when we were private we valued ourselve much cheaper than the market did. Only until the last couple of months did that change.
As a private company we valued ourselves at a 12 to 14 PE. On the public market, we had been as high as 29 for a while but started settling at about 19. That's 50% higher than when we were private.
This allowed us more leverage for acquiring companies. I don't know how often we actually used that stock. I heard that we did many times, but I don't really know.
I'm not in favor of UPS being public, but it has NOTHING to do with the stock price. I think we would be about the same right now if we were private.
Since 1999 I have pondered this issue, and I have indeed done OK with UPS stock, diverisfying, getting my kids through school without loans (2 Casey Scholars, I might add) and I have come to the following conclusions:
1. To have more currency for acquisitions etc because in the 1999 heydey UPS was undervalued compared to the market. The acquisitions with this currency never occurred and we are buying back our currency now. Undervalued then was true, properly valued aorund $60 now is also true.
2. To be a far more visible player in the global market.
3. To encourage the dead wood that was laying around in 1999 to retire.
4. To leverage UPS' Brand and reputation more strongly.
5. To make money for shareholders based on what was known at the time. I made money for sure. But I retired in 2005.
6. To motivate everyone in the company to be 'on their toes' and to maximize competitiveness.
I would never choose to go back private.
In all your 35 or so years at UPS, your UPS stock portfolio's value never took a backward step, that is, until UPS went public. You used to be a partner, partner. But there are no partners anymore, only shareholders. The stock the new people get or buy is subject to market risk. That virtually did not exist when UPS was private. The only valid reason for UPS to go public was to improve the lot of the shareholders. The shareholders have not benefited from going public. And, the new employees have been totally smoked. Period. Amen.
If you own stock in UPS, your are an owner of the company. That means if you work at UPS, its still your company, and partly your business. Yes the stock is down now, but that means the people there now will get this year's MIP and RSU at lower prices, and maybe make some money. The real question is whether UPS is still a good investment. I think it is, but as part of an apppropriately diversified portfolio.
Yes, I was there 38 years ago, and for the 1st 8 years I was there the stock went nowhere. People said the same things then when we were private about young managers and the partnership plan.
The culture of partnership was the philosophy of Jim Casey, and although it was expressed in MIP and other forms of compensation. He kept it above the level of making it mere money. Some people have tarnished that concept, but it is still there. It is a matter of 'management will' to preserve that philosophy. I always did my best.
The issue for us mid-career folks is that the stock price is not appreciating. (I realize there are many factors that impact this and I'm not trying to get into that discussion.) Before UPS went public, our MIP shares were an investment that appreciated. We are still asked to hold a LARGE investment in the company in order to maintain our good standing as a partner. As well, we are given a big part of our compensation in MIP. Today, those MIP shares have not been appreciating and in most case have depreciated. I realize those are just paper losses until liquidation but the feeling of seeing that much tied up in something returning so little is more than frustrating. It's just not the same deal it used to be. All that said, things sure could be a lot worse.
No one challenges any sales done inside the window !!!
More than 75 % of the people i talk to take their MIP in cash.
Remember, we still get rewarded with 1 month of significant level of ownership if we hold onto it which was better than the old plan.
Just think if the stock had gone up $1 a year since 11/99, its value
would be $34.50
For those of us who sold 10% for the initial offering, look at your value of that today and the UPS stock doesn't look as bad.
The grass always looks greener on the other side. I like BIG BROWN and have 10 plus years to go. I AM A PARTNER !!!!!!!!
Perhaps I wasn't clear so I'll try again. Since we went public, the MIP that had to be taken in stock has not been appreciating. Before we went public, it would appreciate. Options have been worthless.
Making half of MIP available as cash was one way to reduce the impact of this reality. No longer awarding options but instead RPUs to lower levels is another attempt at reducing the impact. RPUs are more money locked up which not appreciating but that is certainly better than the worthless options.
The theme of this thread is understanding the benefits of going public. I'm attempting to show how this move has been detrimental (when compared to the pre-IPO system) to the partners that were young in their careers when this occurred. Although these folks did receive an initial gain in their current holdings those holdings were likely modest due to their tenure. This one time gain has not offset the impact of the lack of appreciation in MIP shares since that time which appears likely to continue for the foreseeable future. Contrast that reality with the growth in MIP shares experienced before the IPO.
BTW, a dollar a year is an abysmal return so I don't believe that example is demonstrative of what you were intending.
Please don't take my words as bashing UPS. I'm just stating reality. I fully realize there are no guarantees in life and as I stated before, things could certainly be a lot worse.
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