4 ms·
What? That's absolutely wild. Is this typical? How does it compare to what, say, Alphabet's treasury does?
by fnbr 9y ago
What? That's absolutely wild. Is this typical? How does it compare to what, say, Alphabet's treasury does?
- tbrock 9y agoYes. This is very typical. What do you think Apple does with the hundreds of billions on its balance sheet? It’s not sitting in a savings account earning interest. Sure Apple uses some cash to build factories and technology but has an internal hedge fund invest the majority of it. Same goes for Google, Microsoft, etc.
- tarsinge 9y agoSo in the end companies use their cash to invest in each other? I have a hard time wrapping my head around the economic impact but it doesn’t look very healthy to me (or is it?)
- spdy 9y agoIts a solid route to take if the market goes south the states have to intervene as they did in 2008. Privatize profits socialize loses.
- Johnie 9y agoThey don't invest in each other. They buy low risk securities, like Treasuries.
- PeterisP 9y agoIt kind of makes sense from the investor's perspective. Let's say that I've invested 100m in Apple, and that's the amount I wish to have invested. Apple does not need cash at the moment and is currently reinvesting it in other companies. The alternative would be for them to redistribute money to shareholders - say, I'd get 20m back, and could reinvest it in other companies myself. But there's a big difference - if I'd do it, the 20m would get taxed; if Apple does it directly, then it's not.
- Retric 9y agoStock buybacks are a much better approach than simple dividends from a tax standpoint. I invest in Apple get say 1%. Over next 20 years Apple buys back 50% of it's stock. I now own 2% of Apple without paying any taxes.
- moccachino 9y agoHm.. You still own 1% of Apple right? Otherwise, what happens at the end of 20 years when a 100 investors each buy 1%?
- Retric 9y agoApple can only buy stock when someone sells it. Consider there are 100 shares and you own 1 of them. Now Apple buys 1 share from someone that sold it, that means there are 99 shares and you own 1 of them. Repeat until Apple buys 50 shares, there are 50 outstanding and you own 1 share. Now, apple does a 1:2 split so there are 100 outstanding shares and you own 2 of them post split. It's true that the people selling stocks have to pay capital gains. However, they always need to do that when selling shares to anyone.
- bogomipz 9y ago>"So in the end companies use their cash to invest in each other?" I don't think that's necessarily true. For instance Apple's money manager Braeburn Capital invests their money in very conservative, highly-rated bonds for instance. See: https://qz.com/393093/the-mysterious-fund-in-the-desert-that-manages-apples-cash/ https://qz.com/393093/the-mysterious-fund-in-the-desert-that...
- thisisit 9y agoMost companies mobilize their excess reserves. There is no point in holding cash doing nothing. But I don't think many companies come close to the 30% figure of Airbnb. And hence the question - what happens when markets start go down? If they keep pumping money to the hedge fund they might have a contagion risk on their hands like, as pointed out by paganel in this thread, GE Capital almost taking down GE.
- mcintyre1994 9y agoAn interesting example is Apple: their hedge fund Braeburn Capital (https://en.wikipedia.org/wiki/Braeburn_Capital https://en.wikipedia.org/wiki/Braeburn_Capital) has over $250bn under management. In 2012 it was widely reported as the world's largest hedge fund at less than half its current size so I assume it still is.
- protomyth 9y agoGrain companies do this stuff, so it’s not unique to tech either.