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Is there evidence that the returns are “reinvested into other growth companies”? Why would a growth company return money to investors? They should be using tha
by take_a_breath 6y ago
Is there evidence that the returns are “reinvested into other growth companies”?
Why would a growth company return money to investors? They should be using that capital to grow.
- ac29 6y agoTwo reasons that come to mind: 1) Not all growth is easy or cheap. Investing $X to grow by Y% doesn't mean you can invest 2$X to grow by 2Y%. At some point the ROI is close to zero or even negative, though I would agree with risk-free interest rates also close to zero, nearly any positive ROI is better than cash distributions. 2) Some investors want a portion of profits to be distributed when a company is doing well. Investing in growth is a risk, distributing cash is not.
- take_a_breath 6y agoOnce the value of distributing profits outweighs re-investing in growth, you are no longer a growth company.
- xwdv 6y agoBecause you’re not going to be a growth company forever, and growth companies are where the money is at. So distribute your profits and let’s put that money into other companies ready to explode.