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Halloween, 1997

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How To Dress Up a Company So That No One Recognizes It
Sometimes I Scare Myself

by Ann Coleman (TMF AnnC)

My first professional job after college was as an advertising manager for a small electronics company on Long Island. I wasn't particularly impressed with it. The company was in a big building with an assembly line in the back and executive offices (some of which weren't even occupied) along the front wall. They didn't pay very well, and the office furniture was government surplus -- mostly gray metal and cracked vinyl.

The company was still run by the same Three Guys who had started it fifteen years earlier. These guys never went anywhere exciting -- mostly they sold steel boxes full of wires to the Navy. Sometimes they went down to Washington or visited steel mills in Pennsylvania. The Three Guys' offices had wooden desks, at least. There was only one secretary in the company and she didn't even have an office. She worked in the corner of a long, linoleum-floored hall. I had a cubicle. Like I said... I wasn't impressed.

Then I found out that the company had stock. Well, that was interesting. But the Three Guys who ran the place -- and a few long time employees -- owned most of it. Not so interesting. Still it was stock you could buy from a broker and that was kind of neat.

Then a fellow employee told me that the stock always stayed around $5 a share. He said that every time it got above six dollars "they did something" to keep it down. And the company never paid a dividend. Gee, I thought. Who would want to own that kind of stock?

Well, one day there was a big hubbub in the office. The phone actually rang. Some shareholders (maybe 5 or 6 of them) were calling in a panic because they had checked the paper that day and the stock had dropped from $6 to $4 over night. They were told not to worry... that they would be getting something from the company in the mail.

That afternoon I was in the office of one of the Guys when the secretary, all a-bubble, came in with a check for him. He showed it to me: $292,000. Is that a dividend, I asked? No, it wasn't, he explained. The company, it seemed, had built up too much cash and so they had done a "partial liquidation," and distributed the cash to the stockholders -- $2 and some change per share. I thought, partial liquidation? Sounds like they are going out of business.

Now, the scary part. The following year I was given 100 shares of stock in that company. When I left six months later I was told I would need to decide what to do -- keep it or sell it when the stock vested in about 6 months. Well, the Three Guys still weren't paying the employees very much, the office was still dingy, and the stock price was around $4. Plus, they had just paid all that money out -- the company was 1/3 smaller than it had been. So I said, sell it.

A year later, after I had taken my check, the company got a contract to provide the electronic controls for a new theme park. The stock shot up to $19... and split 4 for 1.

Last August they totally liquidated the company and paid out $5 a share in cash.

Next: Scary Story: Ida the Stockbroker


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