4 ms·
If they were to payout investors with their cash receipts, they would have LESS cash to actually reinvest and grow the business. For Groupon, given the amount o
by far33d 16y ago
If they were to payout investors with their cash receipts, they would have LESS cash to actually reinvest and grow the business. For Groupon, given the amount of competition and the local focus of the business, this would hurt their competitive position significantly against any competitor who decided to reinvest all their cash and raise more money.
- jerf 16y agoAnd if all the businesses work that way, why ever invest? Owning 10% of a company that pays no dividends and can't be sold is worthless unless you can find a sucker. You gotta have some solution where investors have something of some actual value at some point or you're going to see investment go away once they all decide there's no upside.
- far33d 16y agoNo business grows forever - mature businesses should always pay dividends back to their shareholders, public or private.
- jerf 16y agoTrue, certainly, but you can't expect people to invest and wait until the business is "mature" to collect anything in general. A business may take 10 years to mature or more, and it doesn't take much of a discount rate on your money 10 years from now to make the investment very unattractive under any realistic risk model.