The Fifty One Percent

“We never agree on anything”; say some couples. “We won!”, said the majority that had the results go their way despite the minority. “It’s worth a lot, so I should get a lot.”; say so many sellers, artists, homeowners, – and stockholders. Regardless of value, worth, or even relationships, our society emphasizes the majority over consensus. If the majority rules, and you don’t get more than half the vote; then the world may not be the way you want it to be – even if that’s within a couple or between factions.

Ah, truly democratic relationships. Society in microcosm. If both people have exactly 50% of the votes, there are only two votes, each has one, and either person has a veto power over any choice or negotiation. It’s great if there’s always agreement, and it must happen with some folks; but for many, absolute and all-pervasive equality and authority can mean neither person gets to get much done. Give and take are necessary. I’ll leave it to you to decide how that works out in your life.

Step it up, a bit. Companies and unions, and governments can be reduced to relying on bare majorities. Because politics are so bizarre I’ll use business/employee negotiations as an example. The company has demands. The union has demands. Each presents positions that can sound valid, valuable, and defensible. The positions are debated, or at least shouted back and forth; but the resolution comes down to which side can convince 51% of the vote.

For the pedantic types; yes, sometimes it is 50.1%, or 1 vote past 50%, or 60%, or 66%, or 75%, or… The issues aren’t resolved by the better of the positions being resolved by logical debate judged by an independent entity. Who got the most votes? Union contracts come down to how many employees are enticed by the first offer, then the next, with a guess of when enough will accept it, regardless of the importance to the rest.

I’m sure you can make the analogy to government, and possibly not be surprised if votes between two major parties keep coming down to elections that are hard to call in advance, even if they seem foregone conclusions in reflection. Satisfying the barest majority is the cheapest way to win.

Currently there is great debate, argument, and speculation about how much MicroVision is worth (yes, I’m talking about them – again, but the company is a proxy for so many corporate issues.) Look back a few posts (MicroVision MVIS Valuation Shift) and read or at least skip down to “my rickety wobbly valuation model” for MicroVision which results in a price for MVIS of $76. The post was well-received, but I forgot to realize what many investors do not have experience with buyouts and mergers. Those who do know buyouts and mergers are decided directly by the number of votes, and only indirectly by the value of the company. I think MVIS could be worth $76, but I don’t expect it. It could go lower in a negotiation. It could go higher in an auction, and market forces could overrule all in either direction.

As usual, I’ll point off to my seldom-bought book, Dream. Invest. Live. (really, buy a copy and be even more special than on-in-a-million) where I described one situation that made the 51% very apparent: Disney’s buyout of Pixar.

I’ll shorten it here, so pardon as I simplify the story. I owned shares in Pixar almost as soon as it was public. As I recall, that was before Toy Story, back when the idea of computer animation was laughed at and Job’s investment was termed a waste of money. But, I saw some of the very early shorts, extrapolated the potential in my mind, and bought at the earliest opportunity. (Those were busy work times so I missed the IPO.) Fast forward past a few movies and it was apparent Pixar wasn’t a fluke. They were artists, experts, geniuses, passionate, and persistent. The short version: Disney bought (or merged with) Pixar for a small premium of the stock price. Just as Pixar was about to become highly profitable as the revenues were finally being booked, Disney made very good offers to a few people at Pixar. At the time, Steve owned almost a majority alone. Disney needed a majority, though; so, they made very nice offers of stock in Disney and positions in the Disney to possibly fewer than a half dozen people. Disney got Pixar. A select few were selected to be very nicely compensated. The rest of the shareholders received a premium over the stock price which was appreciated, but was far below the future value of Pixar if it had remained independent. (Aside, I recall Pixar’s version of Ratatouille could’ve had a lot of fun making fun of a certain mouse by making a move about a rat if the Pixar animators got uppity. I wonder if I still have those notes.)

Buyouts and mergers are decided by votes, not value.

And, those votes are counted one vote per share, not one vote per shareholder.

So, while many shareholders in MicroVision debate about how much the company is worth, the decision is more likely to be made by what offer has to be made that will receive enough votes. In the scenario I described, I valued the stock at ~$76 – for that particular scenario. Any particular scenario may be valid, but valuations can be secondary to the vote count.

The power of the vote count is something that is familiar to voters in the US. The value of the argument is worth considering and honing – but as an understanding of the issues. The votes may be swung by other things like ideology, peer pressure, habit, promises, and regular real-life distractions.

With every extra bit of news it is possible to shift my opinion of a topic or to alter my algorithm or assumptions about an analysis. The decision, however, will remain with the majority and probably based on a different set of criteria, assumptions, and logic than mine. One for all and all for one? Nice idea. In the meantime, however, we get to watch what it will take to get that one extra vote to fall on the larger side of the scale. The 51st% makes the rules. But, if MVIS gets bought out for >$76/share, well, … let me see the rest of the offer.

About Tom Trimbath

real estate broker / consultant / entrepreneur / writer / photographer / speaker / aerospace engineer / semi-semi-retired More info at: and at my amazon author page:
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