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If a share barely gives you voting rights, and the company does not, and does in the foreseeable future plan to, issue dividends, then what is the inherent valu

If a share barely gives you voting rights, and the company does not, and does in the foreseeable future plan to, issue dividends, then what is the inherent value of the stock? Is it just my portion of the proceeds in case of a firesale?

pbh101 11y ago
The right to sell it when the price rises. You own a part of the company which you acquired at a price that you presumably considered below fair value. Even though there is no premium for voting rights nor expected dividends, but you still own a fraction of the company.
gefh 11y ago
A firesale, or buyout, or merger, or nationalization. It's strange, because few of those terminal events will get you a very high valuation, yet this doesn't seem to have a depressing effect on current values. But if no-one thinks too much about it, there is still plenty of liquidity, and that's really all the evidence the liquidity providers need.
Ankaios 11y ago
Any sale—not necessarily a fire sale.
iabacu 11y ago
There's usually a provision on super-voting shares that automatically convert them to common shares upon transfer. So, in an event where Mark passes away, decides to sell, etc, then the rest of the shares will have more voting power, relatively.
TearsInTheRain 11y ago
Dividends are definitely the primary way of rewarding shareholders but another way a company can reward its shareholders is by doing a buyback. Owning a share gives you ownership over a portion of a companies profits so it is very tangible even if it only exists for you on paper for the time being.
jegutman 11y ago
The structure of the company gives you the right to future dividends at the same rate as other classes of stock. So as long as they think they're creating something of value and the marketplace does you own an equal equity share of that entity. Google finally paid a dividend (although a one-time dividend) and also announced a stock buyback so these companies may start returning capital. As of right now facebook thinks that capital is best put to use inside the company. I think there's a pretty good chance they're right on that. Bottom line, you have the same rights to payments per share as Zuckerberg. Also technically Zuckerberg will at some point (might be 30-50 years from now) start divesting his shares and at some point your stock might be valuable for someone who does want to change the structure of the company or take it private. Another defense is "internal arbitrage". So the company has value, and a different owner might decide to sell off assets or pay dividends to realize that value. But even without the stock changing hands, let's say it started trading at $20 a share. This would encourage Zuckerberg to work with a PE firm to take the company private again. When stocks trade near, at, or above fair value you wont' really see any of these things happen, but if they started trading way below fair value, you would.
- LoSboccacc 11y ago
  Isn't there also a difference between voting stock, non voting and privileged? Just asking since it might be different than my country and seems you rolled them all togheter.
- michaelt 11y ago
  Bottom line, you have the same rights to payments per share as Zuckerberg. Also technically Zuckerberg will at some point (might be 30-50 years from now) start divesting his shares Why would he issue a dividend, where he has to share the money with other shareholders, when he could approve himself a bonus, and not have to share the money with anyone?
  - aianus 11y ago
    Bonuses are fully taxed as income, dividends have a much preferable tax rate.
Dwolb 11y ago
In short, yes. It's your claim to the assets less liabilities of the company. Since Google is trading at around 30x equity, the value equity holders get in case of a sale would be about 1/30th of their market cap. I didn't look at their 10k, but debtors would have claim on any assets before equity. If you're an investor in Google, you're betting either someone will buy the stock higher from you in the future or they will eventually pay dividends when growth slows. Here's a discussion on an internet forum on the topic [1]. [1]http://money.stackexchange.com/questions/51976/if-a-stock-doesnt-pay-dividends-then-why-is-the-stock-worth-anything http://money.stackexchange.com/questions/51976/if-a-stock-do...
jandrese 11y ago
I would assume some people are holding them for purely speculative reasons--planning to sell when the price goes up.
- cjg 11y ago
  But why would the price go up if they have no intrinsic value? The original question was where does that intrinsic value come from.
  - jandrese 11y ago
    People speculate on worthless commodities all of the time under the "there's always a bigger sucker" principle. As long as you aren't the last person left holding the bag you can make a bunch of money. Besides, Apple started paying dividends again back in 2012.
MichaelBurge 11y ago
I'm not sure about the inherent value, but here's an argument that shows that it can't be valueless: If any company's stock is trading too low, you could take a loan and buy out the company using its own profit to pay the loan. So you would expect the stock price to track profits, even if existing shareholders are only in it waiting for a buyout. That idea ensures the stock is valued somewhat accurately(say, within 35% of the 'true' value on the private market), but I wouldn't think it ensures that the market prices are tight down to the cent.
roymurdock 11y ago
Expectations of capital gains and a weak claim on assets.
skoink 11y ago
I wonder the same thing. For the little guy investing in a big company, it seems like owning stocks isn't any different than owning baseball cards. Most shareholders in a big company don't have any where near enough stock to vote meaningfully. And most companies don't pay dividends with and regularity (or ever, for the most part). When dividends are paid, I'd bet that they're isolated and small - not enough to justify the price of the stock. Is there some other mechanism that actually _links_ a company's real worth with its stock prices? If I owned 1% of Google, could I just walk in and demand to exchange my stock for 1% of the company's current assets?

pbh101 11y ago

The right to sell it when the price rises. You own a part of the company which you acquired at a price that you presumably considered below fair value. Even though there is no premium for voting rights nor expected dividends, but you still own a fraction of the company.

gefh 11y ago

A firesale, or buyout, or merger, or nationalization. It's strange, because few of those terminal events will get you a very high valuation, yet this doesn't seem to have a depressing effect on current values. But if no-one thinks too much about it, there is still plenty of liquidity, and that's really all the evidence the liquidity providers need.

Ankaios 11y ago

Any sale—not necessarily a fire sale.

iabacu 11y ago

There's usually a provision on super-voting shares that automatically convert them to common shares upon transfer. So, in an event where Mark passes away, decides to sell, etc, then the rest of the shares will have more voting power, relatively.

TearsInTheRain 11y ago

Dividends are definitely the primary way of rewarding shareholders but another way a company can reward its shareholders is by doing a buyback. Owning a share gives you ownership over a portion of a companies profits so it is very tangible even if it only exists for you on paper for the time being.

jegutman 11y ago

The structure of the company gives you the right to future dividends at the same rate as other classes of stock. So as long as they think they're creating something of value and the marketplace does you own an equal equity share of that entity. Google finally paid a dividend (although a one-time dividend) and also announced a stock buyback so these companies may start returning capital. As of right now facebook thinks that capital is best put to use inside the company. I think there's a pretty good chance they're right on that. Bottom line, you have the same rights to payments per share as Zuckerberg. Also technically Zuckerberg will at some point (might be 30-50 years from now) start divesting his shares and at some point your stock might be valuable for someone who does want to change the structure of the company or take it private. Another defense is "internal arbitrage". So the company has value, and a different owner might decide to sell off assets or pay dividends to realize that value. But even without the stock changing hands, let's say it started trading at $20 a share. This would encourage Zuckerberg to work with a PE firm to take the company private again. When stocks trade near, at, or above fair value you wont' really see any of these things happen, but if they started trading way below fair value, you would.

LoSboccacc 11y ago
Isn't there also a difference between voting stock, non voting and privileged? Just asking since it might be different than my country and seems you rolled them all togheter.
michaelt 11y ago
Bottom line, you have the same rights to payments per share as Zuckerberg. Also technically Zuckerberg will at some point (might be 30-50 years from now) start divesting his shares Why would he issue a dividend, where he has to share the money with other shareholders, when he could approve himself a bonus, and not have to share the money with anyone?
- aianus 11y ago
  Bonuses are fully taxed as income, dividends have a much preferable tax rate.

Dwolb 11y ago

In short, yes. It's your claim to the assets less liabilities of the company. Since Google is trading at around 30x equity, the value equity holders get in case of a sale would be about 1/30th of their market cap. I didn't look at their 10k, but debtors would have claim on any assets before equity. If you're an investor in Google, you're betting either someone will buy the stock higher from you in the future or they will eventually pay dividends when growth slows. Here's a discussion on an internet forum on the topic [1]. [1]http://money.stackexchange.com/questions/51976/if-a-stock-doesnt-pay-dividends-then-why-is-the-stock-worth-anything http://money.stackexchange.com/questions/51976/if-a-stock-do...

jandrese 11y ago

I would assume some people are holding them for purely speculative reasons--planning to sell when the price goes up.

cjg 11y ago
But why would the price go up if they have no intrinsic value? The original question was where does that intrinsic value come from.
- jandrese 11y ago
  People speculate on worthless commodities all of the time under the "there's always a bigger sucker" principle. As long as you aren't the last person left holding the bag you can make a bunch of money. Besides, Apple started paying dividends again back in 2012.

MichaelBurge 11y ago

I'm not sure about the inherent value, but here's an argument that shows that it can't be valueless: If any company's stock is trading too low, you could take a loan and buy out the company using its own profit to pay the loan. So you would expect the stock price to track profits, even if existing shareholders are only in it waiting for a buyout. That idea ensures the stock is valued somewhat accurately(say, within 35% of the 'true' value on the private market), but I wouldn't think it ensures that the market prices are tight down to the cent.

roymurdock 11y ago

Expectations of capital gains and a weak claim on assets.

skoink 11y ago

I wonder the same thing. For the little guy investing in a big company, it seems like owning stocks isn't any different than owning baseball cards. Most shareholders in a big company don't have any where near enough stock to vote meaningfully. And most companies don't pay dividends with and regularity (or ever, for the most part). When dividends are paid, I'd bet that they're isolated and small - not enough to justify the price of the stock. Is there some other mechanism that actually _links_ a company's real worth with its stock prices? If I owned 1% of Google, could I just walk in and demand to exchange my stock for 1% of the company's current assets?