There's lots if issues and investors are actually one of them.
Once a company goes public and starts flogging shares it has to increase share value. That's easy in the early years you just sell more of your core product - the one that took you public in the first place. But then?
Once you hit market saturation you have to do something else, something other than the thing you joke and are good at. This usually means one if two things...
Diversification into products or markets you don't understand or acquisitions. Of the two buying things is easier, you have a ton of money from your core success. The only problem is that by definition people only sell things for more than they're worth so you pretty much always get burnt along the way.
The biggest factor though is that boards and directors are made up of people. People are stupid. We can't help it. Having been successful at something we inherently believe its because of us, not luck, not market conditions, timing, a sweet break, no success is always seen as being the result if decisions we made. This is quickly extrapolated into a mindset of if I'm really good at this I must be really good at other things too. Which is why you saw so many film editors lose their shirts owning restaurants in the 80s. Oops.
So it's a perfect storm, overconfident executives sitting cash rich viewing failing companies not as failures but as opportunities for their superior management skills. We've all seen how that movie ends.
Mike
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