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Other than lower bonuses for employees. Why would this be bad for IBM to have a lower stock price? I understood all the terms, but I wouldn’t know the reasonin
by mettamage 6y ago
Other than lower bonuses for employees. Why would this be bad for IBM to have a lower stock price?
I understood all the terms, but I wouldn’t know the reasoning behind why it is important to be listed in certain places.
- scribu 6y agoIf the stock price is too low, then the company becomes a target for a hostile takeover. As an IBM executive, you don't want some PE firm becoming majority owner and replacing you with someone else.
- mettamage 6y agoI don't know anything about IBM in this regard. Isn't that situation dependant? Or is such a thing common enough to say that this usually is the case? I.e. +50% shares need to be outstanding (assuming nothing is owned by the hostile PE firm).
- scribu 6y agoYou're right, there need to be enough outstanding shares for a hostile takeover to take place. But more relevantly to IBM's case, the top shareholders are also the top executives. [1] So, in this case, the stock price going down affects them direcly. [1] https://www.investopedia.com/articles/insights/052216/top-5-ibm-shareholders-ibm.asp https://www.investopedia.com/articles/insights/052216/top-5-...
- Tehdasi 6y agoTop individual shareholders. Their holdings are tiny, the highest one holds ~10m compared to a market cap of ~100B.
- christophilus 6y agoThe equity value affects your access to capital, if I remember right. So, if you want to take out loans to ramp up after the virus clears, you’ll be impeded by a low stock price. Not saying this is a good move by IBM, but there may be reasons other than evil rich executives.
- fennecfoxen 6y agoBecause they have one job. That job is not "be the caretaker of this flock of people," and honestly, trying to socialize that risk at the firm level leads to a lot of problems (not the least of which being that the firm can fail in a crisis). The purpose of IBM is to make IBM's owners money. When the stock price drops precipitously, they lose money instead. When the stock price falls so low that they fall out of indexes, it will then go even lower, as the companies which hold the stock in an attempt to mimic an index (index funds, etc) switch to getting rid of it instead, which means selling more of it to an already-skeptical public.
- rightbyte 6y agoThe purpose of a shovel is to drain water from fields? Making money for the owners are a side effect of the purpose of a company unless it is a holding company.
- Nasrudith 6y agoThere are multiple purposes for tools. Companies are started to make money as one of their purposes.
- rightbyte 6y agoSure fair enought.
- fennecfoxen 6y agoIf IBM's owners didn't want to earn money on their investments, they'd have sent their money to charity directly, instead of buying IBM stock (and would have gotten much better charitable results). You are confusing the means to an end with the end itself.
- pookeh 6y agoIf IBM owns stock of itself then it can use that stock in lieu of cash to make acquisitions, hires, and bonuses. Having a lower stock price means it has a smaller leverage on those things.