Freeport-McMoRan (FCX)

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The difference between capital raised and profit earnings is nothing long as profit earnings is used too promote the equity being sold to raise the capital.

So let’s say there selling a dollar of equity “ one share for one dollar”

The company is required to invest a dollar.

So one may ask what is the up side.

When you make the claim of investing one dollar your also including capital borrowed as well plus it’s capital cost.

Let’s say you spend fifty cents managing and promoting the equity. This will include the capital cost for the dollar borrowed and spent.

You have a dollar of revenue minus expenses leaving you fifty cents of profit. Now of that fifty cents you owe $. 25 in tax’s ie: treasury stock that is collateralized by the other $.25 of profit to the shareholder.

Both debts are liability. One is collateral liability while the other is a tax debt.

If the money raised is collateral for the tax’s owed then we can assume the government controls it in a trust. This trust money is then lent to the bank at the same rate as the bank had lent money too the company. When the company pays back the debt then and only then will the collateral be realesed back to the shareholder.


As a player in the market what you want to achieve is too purchase the collateral for less then it’s value. This is very tricky cause they are always forward splitting the shares so as too hold its book value.

There is the twenty percent rule that says the underwriters do not have to take action if the value is not greater then 20% in either direction below or above the base book value.

This can also be accomplished by the purchasing and selling of previous purchased equity. Take a close examination of your market cap relative to your retained earnings, deficit or a combination of both plus outstanding debt minus the government interest minus a 50% risk to all liability that is not debt.