4 ms·

You have a right to a portion of the proceeds from a merger or acquisition. Whether or not the company ever actually pays out its earnings as dividends, there'

You have a right to a portion of the proceeds from a merger or acquisition. Whether or not the company ever actually pays out its earnings as dividends, there's little way to access those earnings without divvying them up amongst the company's shareholders.

andrewflnr 9y ago
> there's little way to access those earnings without divvying them up amongst the company's shareholders. This is interesting. So someone has to make a choice between re-investing profit or offering a dividend? Where is this specified?
- ThrustVectoring 9y ago
  Re-investing the profit is a choice by management that turns company assets into more company assets. It doesn't turn company assets into outbound cashflow to owners and investors.
  - andrewflnr 9y ago
    I guess I was overly specific in hopes of eliciting a specific response. Can you just clarify what you were saying where I quoted you before?
    - ThrustVectoring 9y ago
      Sure. Might be easier if I use specific companies and people. If Snapchat ends up being wildly profitable, Evan Spiegel can't simply spend those profits, because they belong to Snapchat. If he wants to spend those profits, his choices are to either collect a dividend from the stock he owns, have Snapchat buy back his shares, or sell the right to participate in those future events on the open market. Or with a super simplified analogy: Snapchat is a box with some cash and the operating business inside it. When Snapchat makes money, it means there's more cash in the box. If someone wants to buy the box, they pay shareholders for it, and if there's more cash in the box the buyer is going to pay more for the box. Paying a dividend is taking cash out of the box and handing it to shareholders. The value of the cash plus the rest of the box is the same whether the box gives money to the owners directly (through a dividend) or indirectly (by getting bought for more money). So really, dividends don't matter. If the company decides not to pay a dividend, it turns $X of stock + $Y of dividend into $X + $Y of stock.
      - andrewflnr 9y ago
        Thanks, that helps a bit more.
hellbanner 9y ago
A merger or acquisition would only happen if the buyer expected to make money from the transaction. This looks like an Even Bigger Fool Theory. It is a little different because the CEO could take dividends whereas I, as a stockowner, cannot. Potentially, a company's performance being good would motivate someone else to buy the company. But what I'm getting out of this is that you don't buy (dividendless) stocks because a company's doing well but ONLY if A) you think they will be sold or Bigger Fool Theory https://en.wikipedia.org/wiki/Greater_fool_theory https://en.wikipedia.org/wiki/Greater_fool_theory
- ThrustVectoring 9y ago
  If a company has a billion dollars more cash than liabilities, it's worth at least a billion dollars in a M&A deal today. You don't need a bigger fool, just someone who's willing to wind down a business to net assets. See what happened to Yahoo as a creative example of this - the operating business was a net liability, but it owned a good chunk of valuable Alibaba stock that made the stock positive-value, so it got split up, sold off, and wound down. The dividends don't matter, IMO. It's net assets and net profits that do.

andrewflnr 9y ago

> there's little way to access those earnings without divvying them up amongst the company's shareholders. This is interesting. So someone has to make a choice between re-investing profit or offering a dividend? Where is this specified?

ThrustVectoring 9y ago
Re-investing the profit is a choice by management that turns company assets into more company assets. It doesn't turn company assets into outbound cashflow to owners and investors.
- andrewflnr 9y ago
  I guess I was overly specific in hopes of eliciting a specific response. Can you just clarify what you were saying where I quoted you before?
  - ThrustVectoring 9y ago
    Sure. Might be easier if I use specific companies and people. If Snapchat ends up being wildly profitable, Evan Spiegel can't simply spend those profits, because they belong to Snapchat. If he wants to spend those profits, his choices are to either collect a dividend from the stock he owns, have Snapchat buy back his shares, or sell the right to participate in those future events on the open market. Or with a super simplified analogy: Snapchat is a box with some cash and the operating business inside it. When Snapchat makes money, it means there's more cash in the box. If someone wants to buy the box, they pay shareholders for it, and if there's more cash in the box the buyer is going to pay more for the box. Paying a dividend is taking cash out of the box and handing it to shareholders. The value of the cash plus the rest of the box is the same whether the box gives money to the owners directly (through a dividend) or indirectly (by getting bought for more money). So really, dividends don't matter. If the company decides not to pay a dividend, it turns $X of stock + $Y of dividend into $X + $Y of stock.
    - andrewflnr 9y ago
      Thanks, that helps a bit more.

hellbanner 9y ago

A merger or acquisition would only happen if the buyer expected to make money from the transaction. This looks like an Even Bigger Fool Theory. It is a little different because the CEO could take dividends whereas I, as a stockowner, cannot. Potentially, a company's performance being good would motivate someone else to buy the company. But what I'm getting out of this is that you don't buy (dividendless) stocks because a company's doing well but ONLY if A) you think they will be sold or Bigger Fool Theory https://en.wikipedia.org/wiki/Greater_fool_theory https://en.wikipedia.org/wiki/Greater_fool_theory

ThrustVectoring 9y ago
If a company has a billion dollars more cash than liabilities, it's worth at least a billion dollars in a M&A deal today. You don't need a bigger fool, just someone who's willing to wind down a business to net assets. See what happened to Yahoo as a creative example of this - the operating business was a net liability, but it owned a good chunk of valuable Alibaba stock that made the stock positive-value, so it got split up, sold off, and wound down. The dividends don't matter, IMO. It's net assets and net profits that do.