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When stocks lack dividend payment, can someone explain their intrinsic value apart from market speculation & https://en.wikipedia.org/wiki/Greater_fool_theory h

When stocks lack dividend payment, can someone explain their intrinsic value apart from market speculation & https://en.wikipedia.org/wiki/Greater_fool_theory https://en.wikipedia.org/wiki/Greater_fool_theory ?

AnimalMuppet 11y ago
They mean that you own a specific fraction of the company (at least until the stock gets diluted). If the company is worth $X, and you own Y% of it, then your stock is worth $XY/100.
- drewrv 11y ago
  If I own 5% of a laundromat that gives me 5% of it's profits each quarter, then I have money coming in. What's the point of owning 5% of a company that never pays shareholders a dime? It seems a bit like owning a piece of property on the moon.
  - scott_karana 11y ago
    It's speculative. You're really just hoping that one day, your company will IPO, and the initial stock price will be (much) higher than the price of your options. Or, if the company starts paying dividends, you could exercise your options and start receiving dividends, but I think that's unlikely knowing the sector we're in. :)
    - hellbanner 11y ago
      But why would someone else buy a stock.. if their only motivation would be that the price increases .. and they sell to someone who.. (GOTO start of post). Is this not the bigger fool theory?
  - AnimalMuppet 11y ago
    The company itself is worth something. It's worth whatever it's worth to someone trying to buy it, for example. As a general guide, it's worth some multiple of its annual profit, with the multiple depending on how fast it's growing and how much longer it's expected to continue growing.
    - hellbanner 11y ago
      With the idea that with 51%, you can control the company's choices, right?
powera 11y ago
Presumably at some point in the future, the company will make money and pay dividends. The 409A valuation is supposed to be an approximation of the valuation based on the likelihood of future dividends (I believe using Generally Accepted Accounting Principles). For a startup, this valuations is almost always a lot less than the top-line valuation used in the press / Series A investments.
zeveb 11y ago
Well, the company can still be worth something when it's sold to someone else. That's not solely speculation, but it's not far from it. I understand the popularity of non-dividend-bearing stock, but I don't like it.
spenczar5 11y ago
At the end of the day, it's belief by someone in future dividends or purchase by another entity. If you don't want the latter to mean 'speculation', then take it to mean 'wholesale acquisition by another company.' That makes stock valuable too.

AnimalMuppet 11y ago

They mean that you own a specific fraction of the company (at least until the stock gets diluted). If the company is worth $X, and you own Y% of it, then your stock is worth $XY/100.

drewrv 11y ago
If I own 5% of a laundromat that gives me 5% of it's profits each quarter, then I have money coming in. What's the point of owning 5% of a company that never pays shareholders a dime? It seems a bit like owning a piece of property on the moon.
- scott_karana 11y ago
  It's speculative. You're really just hoping that one day, your company will IPO, and the initial stock price will be (much) higher than the price of your options. Or, if the company starts paying dividends, you could exercise your options and start receiving dividends, but I think that's unlikely knowing the sector we're in. :)
  - hellbanner 11y ago
    But why would someone else buy a stock.. if their only motivation would be that the price increases .. and they sell to someone who.. (GOTO start of post). Is this not the bigger fool theory?
- AnimalMuppet 11y ago
  The company itself is worth something. It's worth whatever it's worth to someone trying to buy it, for example. As a general guide, it's worth some multiple of its annual profit, with the multiple depending on how fast it's growing and how much longer it's expected to continue growing.
  - hellbanner 11y ago
    With the idea that with 51%, you can control the company's choices, right?

powera 11y ago

Presumably at some point in the future, the company will make money and pay dividends. The 409A valuation is supposed to be an approximation of the valuation based on the likelihood of future dividends (I believe using Generally Accepted Accounting Principles). For a startup, this valuations is almost always a lot less than the top-line valuation used in the press / Series A investments.

zeveb 11y ago

Well, the company can still be worth something when it's sold to someone else. That's not solely speculation, but it's not far from it. I understand the popularity of non-dividend-bearing stock, but I don't like it.

spenczar5 11y ago

At the end of the day, it's belief by someone in future dividends or purchase by another entity. If you don't want the latter to mean 'speculation', then take it to mean 'wholesale acquisition by another company.' That makes stock valuable too.