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Both CloudFlare and Zoom are pretty great products and as much as I applaud their team's IPOs, I'm worried that the vagaries of being a public company will resu
by erikig 7y ago
Both CloudFlare and Zoom are pretty great products and as much as I applaud their team's IPOs, I'm worried that the vagaries of being a public company will result in the GOOG syndrome. That's where a company with a great product is forced to expand every quarter to the point that it becomes a frankenstein-ish hulking version of itself.
- whatshisface 7y agoWhy not just pay a dividend? That's what stocks are supposed to be, shares of ownership in legitimately valuable enterprises with return on investment.
- a13n 7y agoThe owners will make more money if they double the company's value than spend their profits on a 5% dividend to shareholders. Simple capitalism at work.
- deleted 7y ago[deleted]
- michaelt 7y ago...but less money if Google spends the 5% on Google Plus or an Google Messaging Platform No.8 and doesn't double the company's value.
- a13n 7y agoThese are huge swings. Each of these projects has the potential to increase the company's value by $100B and only cost single digit $B. Same model as VC.
- michaelt 7y agoI wish more of the companies represented in my index tracker could make 1B investments with 100B returns. If only it were that easy!
- _-___________-_ 7y ago> That's what stocks are supposed to be Says who?
- deleted 7y ago[deleted]
- AznHisoka 7y agoI agree, but the greater fool theory and financial engineering (ie buybacks) will lead to greater profits for stockholders in the long run.
- whatshisface 7y agoBuybacks are closer to a one-time dividend than they are "financial engineering."
- qeternity 7y agoBuybacks are a more tax efficient vehicle for returning capital to shareholders.
- tomatocracy 7y agoThey're also arguably more cost-efficient if a large portion of investors would just take their dividend and use it to reinvest in the stock - the buyback means that group don't need to incur the friction costs of doing so.
- leedo__ 7y agoWhile this may be true, they seem to be largely funded by debt. Taking on debt and not using it for capital seems exceedingly risky in the face of a recession. And I gather this popular because of the tax implications of a dividend vs increase in stock price. I'm in favor of people paying taxes, so I'd prefer a dividend.
- qeternity 7y agoThis is an entirely different problem and not really true, except for the companies that do so to avoid repatriating foreign capital and incurring US tax rates.
- ls612 7y agoShould Google have paid a dividend in 2004? They made $150MM in profit in the 1st half of that year they definitely had the money to spare...
- dragonwriter 7y agoNo, the return on investment is provided by the claim on assets at dissolution. It can be realized in advance of dissolution (since, as it turns out, companies tend these days to be chartered for open-ended purposes and so not to dissolve when successful) either by trading the claim for money or by the company doing periodic partial dissolutions. The whole idea of public trading is to enable the first to be done efficiently, dividends provide the second, but there is no reason a firm must do both. A firm that does neither makes it harder to realize returns but some investors may be happy to trade that for what they perceive to be higher returns or better serving non-financial interests the investor has.
- twblalock 7y agoGrowth will also give return on investment. I'd rather see Cloudflare invest in growth and R&D than give a dividend. They are nowhere near finished growing.
- freehunter 7y agoWhat more would you expect from them? Not looking for an argument, honest question.
- trevyn 7y agoThey’re getting into some sort of “accelerator VPN” market. They clearly have ambitions to Be The Internet.
- saganus 7y agoWith the growth of space initiatives as we've seen recently, maybe they could pursue some of their own?
- pastor_elm 7y agoAWS-like cloud infrastructure
- pm90 7y agoYep, this would be a godsend. They're already doing something similar with Workers and I do hope the trounce other cloud providers in providing a "Serverless Cloud"
- tolmasky 7y agoWell, at least prior to 2003 there was a strong incentive to prefer gains from stock sale since it could get long term capital gain tax rates (15% now, 20% at the time) vs. dividends which would be taxed as normal income. Since then however, qualified dividends are taxed the same as long term capital gains.
- rolltiide 7y agoTop US long term capital gain tax rate is 20% and there is a 3.8% tax on that
- jjeaff 7y agoThere's more to it than that. In order to pay dividends, you have to pay corporate tax before you can pay out the dividends. And that is almost 40% on the top end. So the effective tax of qualified dividends is more like 60%. Alternatively, if you can stash money overseas in tax free accounts or invest the money back into the business to avoid taxes, then you only have the long term capital gains tax.
- ac29 7y ago"After the passage of the Tax Cuts and Jobs Act, on December 20, 2017, the corporate tax rate has been changed to a flat 21% starting January 1, 2018"
- whatshisface 7y agoCorporate taxes are different from personal income taxes.
- jjeaff 7y agoYou are right. So only double the taxes instead of triple by receiving a dividend.
- toast0 7y ago> Since then however, qualified dividends are taxed the same as long term capital gains. Share buybacks are still better than dividends, because the investor can choose when to recognize the income.
- chocolatebunny 7y agoThe purpose of an IPO is to raise money to do something. It doesn't make any sense to sell part of your company to a random set of people, just to pay them back over time. That's like me getting a mortgage for my house and after 30 years I pay back the mortgage and the bank still gets to own my house.
- mstibbard 7y agoThat's exactly it's purpose though. If you only want a loan you would be raising debt (i.e. corporate bonds) rather than selling equity.
- TheKarateKid 7y agoThat’s what it’s original intent was, but an IPO is now a way for all the investors to earn a return on their private investment and cash out at any time moving forward. In all fairness, private investment was much lower when this was the case. Companies used to do an IPO much earlier when they needed funding instead of raising hundreds of millions in private investment money.
- jartelt 7y agoI believe the point is that you if you don't need to raise any money, you can do a direct listing instead of an IPO. Then you allow investor liquidity without selling equity.
- rrss 7y ago> It doesn't make any sense to sell part of your company to a random set of people, just to pay them back over time. It's unfortunate that this doesn't make sense to you, because that it literally the original purpose of shares in a company. Someone wants to finance a voyage to a far-off land to trade. To do so, they form a company and issue shares of the company. The profits off the voyage (if any) are then divided amongst the shareholders, in proportion to shares held. It was a pretty good idea. (Debt is not the same as equity, not sure why you are talking about mortgages).
- sieabahlpark 7y agoZoom is great especially the malware side of it