What are your Investment Rules?

[Snoopy]

If you're a share holder of a company that has that kind of logic (buying a loss making company to extinguish your profits); then I would have to say that's not a very good company to own. It's not even remotely the concept of a company to exist if they have a motive to draw down expenses in all sorts of means just so they can lower their income.

There was once a company on the NZX, in the pre internet days, called 'Brierley Investments Limited' that operated in this way (edit: Actually they targeted companies with lazy assets on the balance sheet. 'Making an operational loss' was not a must have purchase consideration, although loss making companies would likely be purchased for less). Very successful it was too, for 20+ years. The loss making companies were asset stripped and sometimes returned to the market in a leaner more focussed form. The objective in buying such companies was not, of course, to make a permanent loss on the deal, but to turn these companies around. The fact that there was a tax free period of acquired subsidiary ownership was useful and increased the day to day cashflow that Brierley Investment's had.

SNOOPY