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shubhamjaim is probably referencing their stock exchange strategy, where they never give dividends and reinvest all benefits. In theory it makes the stock price

by tajen 11y ago

shubhamjaim is probably referencing their stock exchange strategy, where they never give dividends and reinvest all benefits. In theory it makes the stock price rise, but one day the trust that Amazon can ever produce dividends will be ballotted (especially if Amazon meets severe hurdles) and the stock price may collpase, ruining all stock holders. So is it a giant Ponzi scheme? Even Apple gave dividends, from 87-95 and 2012-now.

deleted 11y ago
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melvinmt 11y ago
Amazon (intentionally) does not make profits to begin with [1], so there's no dividend to give. [1] https://d28wbuch0jlv7v.cloudfront.net/images/infografik/normal/ChartOfTheDay_1126_Amazons_Aggressive_Growth_Strategy_n.jpg https://d28wbuch0jlv7v.cloudfront.net/images/infografik/norm...
johnchristopher 11y ago
So they basically practice dump on a massive scale to reap the benefits later when every other actors is dead.
MichaelBurge 11y ago
The stock price doesn't necessarily reflect the eventual issuance of dividends. A company that put in its articles of organization "We forbid ourselves from ever issuing even the slightest dividend" I would expect to have a perfectly normal(nearly matching its dividend-allowing equivalent) stock price on the market, and wouldn't consider this abnormal or irrational on the part of the shareholders.
- djhn 11y ago
  This almost makes it an entirely different kind of investment vehicle, one where the underlying value is more similar to bitcoin or gold - commodities commonly traded and used as a store of money - with the difference that investors do retain proportional ownership of the company's capital assets, ip, etc. which convert to cash in the (inevitable?) case of the company shutting down or getting acquired.
mseebach 11y ago
There's nothing wrong with growing instead of paying dividends. Growth: We have 100 outstanding shares of $1, so we're worth $100, we made a "profit" of $5 which we immediately invest in ourselves such that we're now worth $105. Each shareholder is $0.05 better off. Dividends: We have 100 outstanding shares of $1, so we're worth $100, we made a profit (no quotes) of $5 which we pay out in dividends. Each shareholder is $0.05 better off. We also issue five new shares of $1 and invest the revenue in growth, the company is now worth $105. The former model gives Amazon more freedom by isolating them from the whims of stock market (it's hard/expensive to raise money in a down market), and is probably more efficient because there are fewer transactions involved, but requires investment opportunities for the $5. Apple, famously, does not have these opportunities, so the best they can do (indeed, what they're supposed to do -- if investors want to invest in cash, they'll go to the treasury bond market) is to remit the cash to shareholders, through dividends and buy backs.

by tajen 11y ago

deleted 11y ago

[deleted]

melvinmt 11y ago

Amazon (intentionally) does not make profits to begin with [1], so there's no dividend to give. [1] https://d28wbuch0jlv7v.cloudfront.net/images/infografik/normal/ChartOfTheDay_1126_Amazons_Aggressive_Growth_Strategy_n.jpg https://d28wbuch0jlv7v.cloudfront.net/images/infografik/norm...

johnchristopher 11y ago

So they basically practice dump on a massive scale to reap the benefits later when every other actors is dead.

MichaelBurge 11y ago

The stock price doesn't necessarily reflect the eventual issuance of dividends. A company that put in its articles of organization "We forbid ourselves from ever issuing even the slightest dividend" I would expect to have a perfectly normal(nearly matching its dividend-allowing equivalent) stock price on the market, and wouldn't consider this abnormal or irrational on the part of the shareholders.

djhn 11y ago
This almost makes it an entirely different kind of investment vehicle, one where the underlying value is more similar to bitcoin or gold - commodities commonly traded and used as a store of money - with the difference that investors do retain proportional ownership of the company's capital assets, ip, etc. which convert to cash in the (inevitable?) case of the company shutting down or getting acquired.

mseebach 11y ago

There's nothing wrong with growing instead of paying dividends. Growth: We have 100 outstanding shares of $1, so we're worth $100, we made a "profit" of $5 which we immediately invest in ourselves such that we're now worth $105. Each shareholder is $0.05 better off. Dividends: We have 100 outstanding shares of $1, so we're worth $100, we made a profit (no quotes) of $5 which we pay out in dividends. Each shareholder is $0.05 better off. We also issue five new shares of $1 and invest the revenue in growth, the company is now worth $105. The former model gives Amazon more freedom by isolating them from the whims of stock market (it's hard/expensive to raise money in a down market), and is probably more efficient because there are fewer transactions involved, but requires investment opportunities for the $5. Apple, famously, does not have these opportunities, so the best they can do (indeed, what they're supposed to do -- if investors want to invest in cash, they'll go to the treasury bond market) is to remit the cash to shareholders, through dividends and buy backs.