Monday, September 24, 2007

Uchi and its ESOS

Some interesting comments posted on Review Of Uchi Again.

ywt06 said:

  • The greatest investor, warren buffett said esos is not good for the shareholders as it has dilution effect.

    In the other hands, esos is a way to motivate the employees to work hard for the company?

    share buy back is essential if a company continues to issue new shares under esos ....

My reply:

  • Motivation?This issue got me wondering at times. Why do employees of plc needs so much monetary motivation for them to perform?

    Uchi ESOS. Isn't the size of the ESOS simply too excessive?
And regarding the issue of share buyback being essential if a company continues to issue new shares.

Sorry, I for one strongly disagree.

The danger here is clear. The share buyback could be easily be abused. Share buyback could be made to support the share price. Which ultimately could be abused to benefit the ESOS being granted listing during the same period.

In general, share buybacks and listing of ESOS occurring at the same period is simply a big no no for me.

ywt06 continues:
  • well, we need to face the fact. salary and benefits are always the most important factor you work for a company. how many people are working for job satisfaction without considering compensation?it is another way to retain the employees as well ...however, from a shareholder stand point, i disagree ESOS ...

And this probably states exactly the delicate issue of motivation and looking after the well being of the shareholders of company.

I do strongly agree that employees of a company needs to be taken well care. No doubt about it. A happy employee is probably the better foundation of a strong business.

However, let's look at this ESOS again or rather Uchi's ESOS again since it's our focus. ( Click here for the announcement: ESOS ). And they say a picture says a thousand words. If one opens the wordfile attached to the announcement, one would have seen the following table.

Before the ESOS, Uchi has 372.392 million shares.
After the ESOS, Uchi will have 455.213 million shares.

An increase of around 22% new shares in Uchi.

Now, from an investor perspective, this ESOS will see by earnings diluted by some 22% once all these ESOS are exercised. Now surely, as an investor, I would ask why does this company, Uchi, needs a whopping 22% ESOS as motivation?

Would you think that it is simply excessive?


SS said...

If you know Uchi close enuf, you will know there is not many "VIP employees" inside Uchi that really need motivation to work. The main activities is coming from Uchi Optoelectrinics (M) Sdn. Bhd. This is a very small scale organization we are talking about here, don't tell me Ted Kao & Edward Kao need those ESOS for motivation, if you don't know who is Ted & Edward ? Better avoid this counter.

jasonred79 said...

more importantly, how many ESOS do you think are given to those who actually DO WORK/ contribute to earnings?

And how many are given to those who merely sit around doing not much all day.