When we take our time to choose companies that we believe will be successful investments, we do so with two assumptions in mind: that the companies have sufficient growth prospects that we can expect reasonable rates of return, and that the managers of these companies will make decisions to create sustainable shareholder value. Unfortunately, these assumptions aren't always correct. There are always companies out there that can do the opposite and kill shareholder value. Whether by large equity issuances or management blunders, these companies have done one thing well: dilute shareholder value.
Note: Share price appreciation is from the end of the U.S. recession (June 2009) to today. For a little perspective, the S&P 500 has increased 64.54% in that time frame.
What a Fool believes
Not to defend these moves, but sometimes a company needs to take actions against the interests of its shareholders to remain afloat. Enerplus Resources Fund (NYSE:ERF) committed shareholder treason when it cut its distribution in half last June, but the move enabled the company to weather the storm of low natural gas prices and right its ship. The actions of these companies may be hard to swallow, but they may allow for the companies to secure long-term health. Scorn SandRidge for using the equity market as an ATM and scorn LINN Energy for its big pseudo-equity issuances, but perhaps in the long run these moves will pay off.