Top 10 Cash Offender Countdown: No. 3 to No. 1http://www.fool.com/investing/general/2012/09/27/top-10-cash-offender-countdown-no-3-to-no-1.aspx Tom Jacobs
September 27, 2012
Of the 10 companies whose stock-based compensation over the last 12 months is 100% or more of operating cash flow, the final three don't even come close to a passing grade in my book. By adding back stock-based comp, they may accurately reflect that it doesn't cost them any cold hard cash today, but it implies that it won't have a huge impact on the future. Yet stock-based comp represents an IOU, and when options are eventually exercised, investors get diluted.
And now the top three offenders, where "top" is the worst designation:
Source: S&P Capital IQ, data as of market close, Sept. 24, 2012.
No. 3: Atlas Energy LP (NYSE: ATLS )
But what then does Atlas Energy do with the cash? As holders of limited partnership interests, investors have limited power over a general partner in this structure, with few rights to stand against management's incentive to feather its nest to turn it into a bird mansion.
Here, note stock-based comp at 392% of OCF. True, the GP-LP structure makes this number not so simple and OCF more confusing, but not enough to move us from strong advice. Atlas Energy essentially issues options to itself -- IOUs that, while they have no current cash value, just put off taking your cash in the form of dilution ahead. No wonder a recent company presentation is all about Atlas Energy's two units and not about what the GP -- Atlas Energy -- does for shareholders.
Investors, I advise you stand not on Atlas Energy's shoulders.
No. 2: Youku Tudou (NYSE: YOKU )