Recent news stories about he unsealing of divorce papers that include Mitt Romney’s testimony reveal this tidbit:
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](http://www.salon.com/2012/10/25/october_surprise_romney_may_have_screwed_over_his_friends_ex_wife/)
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](http://hosted.ap.org/dynamic/stories/U/US_PRESIDENTIAL_CAMPAIGN?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2012-10-26-03-30-14)
It sure doesn’t depict Romney in a good light.
Will the Obama campaign pick this ball up and run with it?
No. Too technical, and weasels will just weasel about it.
So she got 500,000 shares of stock and sold it before the IPO. If she would’ve held onto it for a year she could’ve sold it for $22.00. Sounds like she simply made a bad investment decision and didnt think Staples stock value would increase over time.
Yeah, the bitter pissed off ex wife foolishly sold her stock early. She’d be a multi millionaire now if she still had that stock. Staples is a big office supply chain. 2000 stores in 26 countries.
Staples Inc. - Wikipedia.
That Bostonarticle mentions the million dollar house and other things she got in the divorce. She was all set if she had kept that stock. Her own fault.
Thank goodness the mutual gag order is in place. That was one ugly nasty divorce. I don’t want to hear her venom in sound bites.
She did sell some stock after the IPO. Even that was just incredibly stupid. I’m not sure what Staples stock trades for now. It must be way more than $23 a share.
The divorce was in 1987. Another article said she had this in various courts battling the original money settlement until 2000. What a sad waste of ones life. Hatred does nothing but eat your insides. I try hard to set aside my anger and live for today. My acid reflux appreciates it. lol
I don’t pretend to understand stocks and whatnot, but to my untrained eyes, this is what it looks like.
While this will not be a campaign issue I do have to ask - did Romney lie about his assessment of the worth of Staples or was he not very good at valuing companies?
I read most of the court testimony. It’s pretty mind numbing. Staples was a start up Bain invested in. Staples CEO Tom Stemberg had a lot of restrictions on his stock in those early years. If he was fired by the board then his stock had to be sold back to Bain at a discount. There were 6 restrictions like that and they lowered the potential value of his stock. It’s all in the transcript.
It’s just really hard to value stock in a start up. There’s so many things to consider. Romney was on the stand two days trying to explain it.
The first 5 pages are a good read because it explains how Bain operated in 87. After that is the stock valuation and its complicated.
Off by tenfold? Sure it is complicated but it was what he was supposed to be good at. His job.
How dare you suggest that Romney display any core competency.
Thanks to VanLandry and aceplace57 for explaining this so well; you guys rock.
Romney didn’t testify in the initial divorce case. This case was 4 years later, when the wife decided to sue the husband. He was vouching for the price of the stock, after it was already known how the IPO went. The wife had sold shares for slightly more than they were valued in the divorce case. Like it or not, sell price is market price, and market price IS the value of a stock.
And even if the stock was undervalued in the divorce case, they still split it 50-50. I don’t see how that could be unfair. Value per share doesn’t really come into play if it’s split evenly.
This whole issue is almost as stupid as Trump’s.
Agreed. No one forced the lady to sell too early. Make a mistake like this then you just have to live with it.
Besides, Romney’s testimony was only one small piece of the trial. The transcript references Staple’s board meeting notes, and I’m sure there must of been other financial witnesses. These were some pretty sharp finance lawyers (on both sides) with good bs meters. If Romney’s stock valuations were too far off then the trial would have gone in the ex wife’s favor.
It’s about $11 a share.
The incredible part of STAPLES stock value is that there were at least 10 splits in 3:2 ratio - effectively, your number of shares increases by 50% - which essentially means that if you had 100 shares before 1990 now you’d have 5,766 shares. Suppose in 1990 you bought 100 shares for $2.5 and paid $250 for it - today that would be $63,426.
If my math is correct 
ISTM that if the stock had been valued more highly at the time of the settlement, he would have had to put out FEWER shares of it.
You don’t appear to have knowledge of or experience with venture capital.
Venture capital is a high-risk high-reward business. No one, not Romney, not anyone else, can know for certain what a start up will eventually be worth. The price of start up companies is generally low relative to their potential rewards, because the overwhelming majority of them go bankrupt. Of the ones that don’t, there is the potential to make enormous returns on the original investment. The way a successful venture capital firm makes its money is not by being right every time, but by being right often enough such that the outsize rewards in the few cases that are successful outweigh the losses on the majority that are not.
If anyone would have bought decent amounts of Apple, Microsoft, or any number of similar such companies at the outset, they would be wealthy today - the prices of these companies were only small fractions of what they are today. But the prices were what they were because that was what the market was willing to pay at that time. Does that mean that no one “was very good at valuing companies”? It means that the true value was unknowable no matter how good or not good you were.
Romney made this point in his testimony. Bain Capital itself did not buy the full allottment of Staples stock to which they were entitled. They did buy some, of course. There was a good chance that the stock would appreciate significantly. There was also a good chance that it would go bankrupt entirely. That’s the nature of venture capital investments.
(Much like gambling on horseracing, when you think about it, but it has more of a productive role in society.)
Having bought Apple at $10/share (admittedly selling much off along the way, “rebalancing” as advised) I can state that even Apple has not gone up tenfold in one year.
The specific numbers are not important. I was illustrating the general principle.
The dynamic that I described is even sharper in the pre-IPO period.
And the general principle is not in dispute. The magnitude in such a short period of time, the specific numbers in this specific example, is the issue I was asking about.
Analyses go like this: I have x amount of money to put into a basket of speculative high risk stocks. For each one I balance out my assessment of the odds that it will go to zero or nearly so, versus my assessment of its doubling or higher. If I think there is a 50% chance that it will go zero then there should be a 50% chance that it will slightly more than than double. Simplistically put (looking only two potential outcomes) break even on an assessment that there is a 10% chance of a ten-bagger is 90% odds of going to zero (given a large basket of speculative plays). Did so much materially change so much in one year of expansion (and still no net earnings at the time of the IPO) to change that assessment that much?
In a high-risk high-reward situation, you don’t accept “slightly more than double” on a 50% chance of losing everything. There’s a considerable premium in the expected return that you get for taking that level of risk.
Beyond that, you need to know the specifics of the situation. In general, businesses at that stage change a lot quicker than more established ones.