Cashless Buybackstm: Math, Not Magic
Here are two puzzles. Call us, and we will explain the math behind the magic.
The Genie, 3 Bottles, and The Elixir of Life
A genie appears and places before you 3 bottles. The genie declares that 1 bottle contains the Elixir of Life (the secret of happiness); the other 2 bottles contain cheap wine. The genie allows you to choose one bottle to drink but provides no additional information to assist you in your selection. You randomly select one bottle and leave the other 2 on the table.
"Stop!" says the genie before you can drink from the chosen bottle. "I will do you a favor."
The genie throws away one of the 2 bottles you left on the table.
"The bottle I have thrown away was a decoy. The Elixir of Life is either in the bottle still on the table or the bottle you hold in your hand. If you wish, you may choose again. Take your pick."
Which bottle do you now choose? Do you keep the one in your hand? Or do you exchange it for the one on the table?
Note: 90% of people surveyed declare the odds are 50/50, i.e. it makes no difference which of the 2 remaining bottles you select. Your teenage children may tell you that, actually, the odds are 67% that the bottle on the table is the right choice.
The Cashless Buybacktm
MG Holdings/SIP tells you that they will commit today to the following transaction for the benefit of your company:
If your company's stock, now trading at $10 per share, hits a target of $16 anytime within 3 years, MG Holdings/SIP will then immediately sell for your company a large block of stock at a price of $30. Or, if your company has no need of cash, then, upon hitting the $16 target, MG Holdings/SIP will instead immediately deliver back to your company 20% of its outstanding shares at a cost of $0 (zero; i.e. neither you nor your company pay anything for the repurchased shares). If your company fails to hit the $16 target, that's ok: There is no penalty to the firm or its participating shareholders - no interest, no debt, no dilution, no fee. Your shareholders will applaud the deal, and all major parties (in particular the company and its shareholders) will be happy with the results of the transaction.
How does MG Holdings/SIP do this?
Note: 99% of people say this transaction is too good to be true. Your teenage children might agree, but, in this case, they would be wrong.