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It's worth pointing out that the purchase, as based on today's price action, was effectively "free". Amazon market cap went up 3.5% as of the current tick, rou

It's worth pointing out that the purchase, as based on today's price action, was effectively "free". Amazon market cap went up 3.5% as of the current tick, roughly $15.5B. The market effectively rewarded AMZN for the transaction far beyond the actual $13.7B tender offer!

KekDemaga 9y ago
That is a great observation. Something like that is unimaginable to me.
- Applejinx 9y ago
  You've got to be able to understand it, though, to make sense of market capitalism. Basically if the stock went up the price of that acquisition plus two billion dollars, that is a very powerful price signaling and a difficult command to disobey. It means there's an opportunity cost: all other things being equal, it would cost Amazon two billion dollars in market capitalization to NOT do whatever the hell Wall Street THINKS they're going to do with Whole Foods. Maybe the market thinks they're going to use them as bases for grocery distribution: reward, the cost of acquisition plus a bonus two billion. Maybe the market thinks they're going to gut the company, fire everybody, and then there's one less competitor for what Amazon means to do with groceries! Maybe the market thinks they'll take the existing Amazon grocery stuff and rebrand it Whole Foods and the rabble will buy into that for a time. The point is that this money really isn't free: it's conditional on whether Amazon does what the investors think they're gonna do, with the acquisition. If Amazon fails to do that, the market capitalization can evaporate. My own hunch is that the market thinks Amazon is super efficient and acquisitive, and that Whole Foods is weak and inefficient and misguided. As such, the expectation of greedy and amoral investors is that Amazon will take over and whip Whole Foods into shape, maybe even fire everybody and replace 'em with Amazonians, and that will make Whole Foods 'better' and justify the exercise. They certainly aren't buying into Whole Foods' 'enlightened' memes: that has no place on Wall Street. So I'm guessing it's BECAUSE Whole Foods has been 'enlightened' that the prospect of wrecking that so motivates investors. They figure that the Amazon way is clearly the winning way, and they figure there will be a BIG difference in how things are done, and it's a difference they characterize as 'good for capital', so there's a synergistic effect that makes it 'free' for Amazon plus a bonus. And then Amazon is obligated to do what's expected of them, which I think is probably kinda predictable.
prewett 9y ago
No, they are paying in cash, not stock. The company sold the stock a long time ago, so whatever the stock does has no impact on the company. The stockholders, however, benefited 3.5%, assuming they sell now.
- examancer 9y ago
  This is not accurate. Companies hold back some stock during their IPO for various reasons. Amazon held back 23 million shares. It also has repurchased a fair number of shares it holds as "treasury stock" on its balance sheet that appears to have netted them a few billion in appreciation. This of course pales in comparison to the 478 million outstanding shares, so, you are correct: their shares don't appreciate nearly enough from the $15 billion surge in market cap to pay for the $13.7 billion purchase. However, to say "whatever the stock does has no impact on the company" is also inaccurate.
  - megablast 9y ago
    Sure, but they aren't taking advantage of this rise unless they sell more stock, right.
    - thrill 9y ago
      Stock price is fungible (with good management) - the increased value can have effect elsewhere.
- drtz 9y ago
  The cash itself is owned by the shareholders.
  - dragonwriter 9y ago
    No, the cash is owned by the corporation. The shareholders own the right to participate in corporate governance in the degree appropriate to the particular shares they own, and own the right to take ownership of a particular share of the net assets if and when the corporation should be dissolved. They do not, either in theory or in practice, own the assets of the corporation while it exists.
acchow 9y ago
This is synergy. The market thinks that WFM + AMZN together as one is worth more than the sum of their parts. I should hope so. "effectively free" is a strange label to give this.
- deleted 9y ago
  [deleted]
visvavasu 9y ago
Thanks

KekDemaga 9y ago

That is a great observation. Something like that is unimaginable to me.

Applejinx 9y ago
You've got to be able to understand it, though, to make sense of market capitalism. Basically if the stock went up the price of that acquisition plus two billion dollars, that is a very powerful price signaling and a difficult command to disobey. It means there's an opportunity cost: all other things being equal, it would cost Amazon two billion dollars in market capitalization to NOT do whatever the hell Wall Street THINKS they're going to do with Whole Foods. Maybe the market thinks they're going to use them as bases for grocery distribution: reward, the cost of acquisition plus a bonus two billion. Maybe the market thinks they're going to gut the company, fire everybody, and then there's one less competitor for what Amazon means to do with groceries! Maybe the market thinks they'll take the existing Amazon grocery stuff and rebrand it Whole Foods and the rabble will buy into that for a time. The point is that this money really isn't free: it's conditional on whether Amazon does what the investors think they're gonna do, with the acquisition. If Amazon fails to do that, the market capitalization can evaporate. My own hunch is that the market thinks Amazon is super efficient and acquisitive, and that Whole Foods is weak and inefficient and misguided. As such, the expectation of greedy and amoral investors is that Amazon will take over and whip Whole Foods into shape, maybe even fire everybody and replace 'em with Amazonians, and that will make Whole Foods 'better' and justify the exercise. They certainly aren't buying into Whole Foods' 'enlightened' memes: that has no place on Wall Street. So I'm guessing it's BECAUSE Whole Foods has been 'enlightened' that the prospect of wrecking that so motivates investors. They figure that the Amazon way is clearly the winning way, and they figure there will be a BIG difference in how things are done, and it's a difference they characterize as 'good for capital', so there's a synergistic effect that makes it 'free' for Amazon plus a bonus. And then Amazon is obligated to do what's expected of them, which I think is probably kinda predictable.

prewett 9y ago

No, they are paying in cash, not stock. The company sold the stock a long time ago, so whatever the stock does has no impact on the company. The stockholders, however, benefited 3.5%, assuming they sell now.

examancer 9y ago
This is not accurate. Companies hold back some stock during their IPO for various reasons. Amazon held back 23 million shares. It also has repurchased a fair number of shares it holds as "treasury stock" on its balance sheet that appears to have netted them a few billion in appreciation. This of course pales in comparison to the 478 million outstanding shares, so, you are correct: their shares don't appreciate nearly enough from the $15 billion surge in market cap to pay for the $13.7 billion purchase. However, to say "whatever the stock does has no impact on the company" is also inaccurate.
- megablast 9y ago
  Sure, but they aren't taking advantage of this rise unless they sell more stock, right.
  - thrill 9y ago
    Stock price is fungible (with good management) - the increased value can have effect elsewhere.
drtz 9y ago
The cash itself is owned by the shareholders.
- dragonwriter 9y ago
  No, the cash is owned by the corporation. The shareholders own the right to participate in corporate governance in the degree appropriate to the particular shares they own, and own the right to take ownership of a particular share of the net assets if and when the corporation should be dissolved. They do not, either in theory or in practice, own the assets of the corporation while it exists.

acchow 9y ago

This is synergy. The market thinks that WFM + AMZN together as one is worth more than the sum of their parts. I should hope so. "effectively free" is a strange label to give this.

deleted 9y ago
[deleted]

visvavasu 9y ago

Thanks