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For SLReports.net Investors Ask: "Big Salaries, No Dividend, What's Up with That?"...
Hoorenbeek (HBK : SLCAPEX), one of Second Life's most recognizeable and successful apparel retailers, posted their December Financials and resumed trading yesterday.
December Revenues reflected an almost L$500,000 increase, likely due to holiday shopping in Second Life, and an increase in gross profit margin from 76% to 80%. What also increased, and has raised eyebrows, is Administrative Salaries to previous levels, increasing from L$600,000 back up to the L$900,000 level that they remained at back when HBK(SLCAPEX) was consistently breaking the L$1,000,000 revenue range.
So, while Administrative Salaries totalling L$ 17,200,000 have been paid out since January 2008, only L$70,000 has been returned to shareholders in dividends, while earnings of L$94,547 have been retained by the company.
CEO Limer Fredriksson owns 74.1% of the outstanding shares of the company, so any distribution of dividends would be of most benefit to him.
In Febuary 2008, Fredriksson announced that Pilgrim Nordwind and Ansor Hoorenbeek were to start receiving salaries of L$200,000 a month. A lengthy post followed as Fredriksson explained the rational, which is completely reasonable, citing the amount of time and effort that goes into making a company such as HBK(SLCAPEX) grow and succeed. What is more troubling, however, is the differentiation that Fredriksson makes between HBK(SLCAPEX) and SLCAPEX, stating on Febuary 24th, 2008, "Despite of our company being real (and you can easily get proof of it), SLCapex is a game we decided to play. We don't say this in a contemptuous way nor we underestimate SLCapex, but don't forget about it. It is a GAME we all CHOOSE to play."
Part of the rational in cutting the regular dividend payments was also explained at that time by Fredriksson who stated, "Furthermore, our experience shows that even when giving good dividends and not getting our salaries paid, shares never kept stable at more than L$1.3. So, if in spite of our sacrifice, shares didn't increase in value proportional to the real company growth, neither we believe that they should go down for not giving dividends for a while. And if shares didn't kept stable at a higher price or if they go down from now on, it is because of the great quantity of "trash investors" inside SLCapex. These investors are, for example, the ones who buy L$10.000 of shares at L$1 and when shares are about L$1.4 they sell them at L$1.1 to win L$1000. This makes the share price to go down all the time, damaging the serious investors who appoint for a long/medium term business."
"These "trash investors" are the ones we do NOT want in [ hoorenbeek ]. Neither we want investors that think everything is about getting a dividend every month. This is NOT how investing works. Do you buy USD10k in Google shares to expect getting a dividend paid every year to recoup your investment? If so, you have no idea what this game is about. Please go play the stock market with other's company shares."
For those who would say "Yes, I buy shares of stock on the hope of receiving an income regularly through the payment of dividends", apparently Hoorenbeek is not the company to be invested in. Considering that while the company continues to grow in relation to sales, spending sometimes more than half-a-million Lindens developing new products, increasing revenues, increasing salaries, and the stock continues to drop from the long forgotten L$1.30 range to it's current hovering between the mid-teens and high-$0.30's range. Also, the "growth stock" argument seems to lose significance when Fredriksson takes no time out of their busy 8-hour a day work schedules to communicate in the forums to build a percieved value in the stock, takes no time letting investors know forward guidance, no perceived plans to do company buybacks, no perceived plans to do a stock split--so the argument that "we are not a dividend paying stock, we are a growth stock" seems to be quite null and void.
The fact that Hoorenbeek IS one of Second Life's most valuable and quality brands IS of value to investors--if there could be ten more companies just like it, the marketplace would be a much more "product-driven" and dynamic situation, warranting a glut of Investment Firms each vying each other for better position in the consumer stocks--however, to ignore ALL investors because of a dissatisfaction with the motives or trading practices of SOME of them is a cruel and highly counterproductive stance to take. Because this reporter comes to the "game" so much later than Hoorenbeek, I am not sure if there WAS such a thing as Hoorenbeek without the investors, and if so, perhaps it was a bad idea to join the SLCAPEX "game" if the management's taste for the "game" was dissatisfactory. BUT, if Hoorenbeek was created on the backs and investments made by hundreds of other individuals lindens--those persons who now hold those shares of the company, whether they are day traders, long term investors, etc, deserve to receive recognition from the company, they deserve respect and not contemptuous silence, and deserve some action by the company to prove WHY there should be interest in their stock whatsoever.
Indeed, if it was the plan of Hoorenbeek to ignore the stockholders until such a point that it was so low that they could buy it all back at a fraction of the original IPO and go private, has that time not now come?
If not, wouldn't some sort of action by the CEO to RAISE stock value be of direct benefit to him, as he owns 74%? I don't know how this number may have changed over the course of the last few months, and if there is indeed a buyback going on, if the CEO was to even MENTION this fact to the investing public, then shareprices would indeed rebound. But wait--wouldn't this be counter-productive to an attempt to go private on the cheap?
I report what I can read and what I can surmise by collecting all available information.
The investor decides. TOP NEWS:
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