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He holds the largest shareholding by a wide margin: 3x as much as Vanguard, the next largest, who will generally not interfere. More to the point, people have

He holds the largest shareholding by a wide margin: 3x as much as Vanguard, the next largest, who will generally not interfere. More to the point, people have accepted Amazon as a growth company. So long as Wall St likes the story, the price goes up, everyone is happy. On the other hand, AMZN is trading at ~230x earnings and ~4.6x revenue. For comparison WMT (Walmart) is trading at ~30x and ~0.5x respectively. Amazon is growing much faster, but there are no guarantees that it will do so forever. To reach ratios like Walmart's it will need to take in ~$3.8Tn of revenue.

pgodzin 8y ago
When you say Vanguard has the next largest, does that mean they are holding it for their clients or own it themselves? If I invest in a Vanguard ETF which contains AMZN does Vanguard maintain voting rights? Can it leverage its holdings on behalf of its customers to take over a company if it becomes the largest shareholder?
- jacques_chester 8y ago
  Shares grant a lot of rights, but the basic concept of an ETF is to hold shares proportional to an index and leave it at that. They will generally not be activist holders. This reduces the cost of holding. Nobody needs to be hired to do research, to lobby, to plan etc. You basically have people babysitting a computer program, which is relatively cheap.
  - pgodzin 8y ago
    I understand they generally will not be activist holders, but can they be? If I buy a Vanguard ETF they hold the rights to all the stocks in the ETF, not me?
    - jacques_chester 8y ago
      Buying into an ETF is buying into a company that owns shares. The ETF owns the shares in other companies, you own shares in the ETF. You do not own the shares that the ETF owns. Similarly, if you buy shares in Apple, you do not directly own its cash, facilities, intangible assets etc. Apple owns these. But you own voting rights and the ability to participate in dividends or buybacks. In both cases the company -- the company's management, really -- has a wide degree of freedom in what it does. Apple can buy companies or sell iPhones without consulting shareholders. ETFs can buy and sell shares similarly. Similar-looking but quite distinct is the trustee/beneficiary relationship from trusts law. In that case the trustee legally holds property "for the benefit of" the beneficial owner. Again, as a beneficiary, you would not own the shares held by a trust on your behalf, but the trust would need to buy and sell them according to its view of your best interests. Since both corporations and trusts have wide-ranging legal, financial and taxation implications, the details vary widely depending on where you are. Each jurisdiction has comparable but distinct caselaw and of course legislatures have tinkered quite feverishly with it too. I am, of course, not a lawyer. I didn't even finish law school.
    - tonfa 8y ago
      Yes, and they do vote. https://www.bloomberg.com/view/articles/2018-01-30/iss-tells-investors-how-they-want-to-vote https://www.bloomberg.com/view/articles/2018-01-30/iss-tells... has some useful pointers.
dwaltrip 8y ago
Small correction: to have a ratio of 0.5x revenue with their current market cap they would need annual revenues of $1.8T (obviously, still a very large number). For comparison, their revenue in 2017 was $178 billion, and in 2013 it was $74 billion.
- jacques_chester 8y ago
  I see what I did: crossed the wires on earnings and revenue between the steps. (2 trillion dollars seems like a big correction to me, btw)
- refurb 8y ago
  This is a great way to think about it. Amazon is priced the same as a $1.8T company, so the assumption is that they will grow that big. It’s not entirely unreasonable as Walmart’s total revenue today is $0.5B.

pgodzin 8y ago

When you say Vanguard has the next largest, does that mean they are holding it for their clients or own it themselves? If I invest in a Vanguard ETF which contains AMZN does Vanguard maintain voting rights? Can it leverage its holdings on behalf of its customers to take over a company if it becomes the largest shareholder?

jacques_chester 8y ago
Shares grant a lot of rights, but the basic concept of an ETF is to hold shares proportional to an index and leave it at that. They will generally not be activist holders. This reduces the cost of holding. Nobody needs to be hired to do research, to lobby, to plan etc. You basically have people babysitting a computer program, which is relatively cheap.
- pgodzin 8y ago
  I understand they generally will not be activist holders, but can they be? If I buy a Vanguard ETF they hold the rights to all the stocks in the ETF, not me?
  - jacques_chester 8y ago
    Buying into an ETF is buying into a company that owns shares. The ETF owns the shares in other companies, you own shares in the ETF. You do not own the shares that the ETF owns. Similarly, if you buy shares in Apple, you do not directly own its cash, facilities, intangible assets etc. Apple owns these. But you own voting rights and the ability to participate in dividends or buybacks. In both cases the company -- the company's management, really -- has a wide degree of freedom in what it does. Apple can buy companies or sell iPhones without consulting shareholders. ETFs can buy and sell shares similarly. Similar-looking but quite distinct is the trustee/beneficiary relationship from trusts law. In that case the trustee legally holds property "for the benefit of" the beneficial owner. Again, as a beneficiary, you would not own the shares held by a trust on your behalf, but the trust would need to buy and sell them according to its view of your best interests. Since both corporations and trusts have wide-ranging legal, financial and taxation implications, the details vary widely depending on where you are. Each jurisdiction has comparable but distinct caselaw and of course legislatures have tinkered quite feverishly with it too. I am, of course, not a lawyer. I didn't even finish law school.
  - tonfa 8y ago
    Yes, and they do vote. https://www.bloomberg.com/view/articles/2018-01-30/iss-tells-investors-how-they-want-to-vote https://www.bloomberg.com/view/articles/2018-01-30/iss-tells... has some useful pointers.

dwaltrip 8y ago

Small correction: to have a ratio of 0.5x revenue with their current market cap they would need annual revenues of $1.8T (obviously, still a very large number). For comparison, their revenue in 2017 was $178 billion, and in 2013 it was $74 billion.

jacques_chester 8y ago
I see what I did: crossed the wires on earnings and revenue between the steps. (2 trillion dollars seems like a big correction to me, btw)
refurb 8y ago
This is a great way to think about it. Amazon is priced the same as a $1.8T company, so the assumption is that they will grow that big. It’s not entirely unreasonable as Walmart’s total revenue today is $0.5B.