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Page may justifiably dislike Wall Street and their short-term orientation, but he probably does need to detail his vision for shareholders esp the long-term typ

by asanwal 16y ago

Page may justifiably dislike Wall Street and their short-term orientation, but he probably does need to detail his vision for shareholders esp the long-term type of investor. Because if that type of shareholder loses faith in the company's direction and Page's leadership and start voting by not buying Google's stock, that will have deleterious impacts. Most obviously, given the talent wars in the Valley, a dropping stock price will not help Google attract top talent vs. pre-IPO companies where the value of options and stock is uncertain and the upside seems and may be higher.

xiaoma 16y ago
I disagree. First of all, share prices are always going to be tied to the fundamental values of a company to some extent. No matter how much an analyst hates a company, if it's generating 50 billion in profits each year, it's clearly worth a market cap of at least a few hundred billion. If Page is right, and is in the process of growing his company to that level over the next ten years, even an analyst who hated the company would be compelled to give it triple, more likely 5-6 times its current valuation. Furthermore, since Google is highly profitable and has no need to ask the market for more investment, it's not beholden to short term share prices. If the stock price were brutally and irrationally hammered, the logical reaction would be to just spend some of their billions in cash to buy back outstanding shares at the irrationally low price. This would concentrate the ownership of all current share holders, thus giving them a both an immediate increase in value per share and an indefinitely larger chunk of whatever profit is being generated. One way or another, the either the valuation will be sufficiently close to reality or the company will just start paying a dividend of which none of the irrational sellers get any. Obviously no established company can compete with the potential upside of a small company which is offering a large stake to early employees and just might make it huge. But a one time fluctuation to share price won't matter in the long run. Remember it's a linear adjustment and growth rates of investments are calculated by taking a geometric mean, not an arithmetic mean.
- asanwal 16y ago
  I think your comment on share buy backs is not steeped in reality. Moreoever, share price is not always tied to fundamental value of a company. For value stocks, it is. But for tech companies (growth stocks), it is often tied to implied or expected growth. And if Page can't articulate where that growth will come from, the stock price can get hurt.
  - infinite8s 16y ago
    Yes, but the GP's point was that Google's growth as a company is independent of it's stock price. I almost hope that Wall Street doesn't look favourably on Google for a while - it means that the stock will be a (relative) bargain (if Page is able to execute on his un-articulated long-term vision).

by asanwal 16y ago

xiaoma 16y ago

I disagree. First of all, share prices are always going to be tied to the fundamental values of a company to some extent. No matter how much an analyst hates a company, if it's generating 50 billion in profits each year, it's clearly worth a market cap of at least a few hundred billion. If Page is right, and is in the process of growing his company to that level over the next ten years, even an analyst who hated the company would be compelled to give it triple, more likely 5-6 times its current valuation. Furthermore, since Google is highly profitable and has no need to ask the market for more investment, it's not beholden to short term share prices. If the stock price were brutally and irrationally hammered, the logical reaction would be to just spend some of their billions in cash to buy back outstanding shares at the irrationally low price. This would concentrate the ownership of all current share holders, thus giving them a both an immediate increase in value per share and an indefinitely larger chunk of whatever profit is being generated. One way or another, the either the valuation will be sufficiently close to reality or the company will just start paying a dividend of which none of the irrational sellers get any. Obviously no established company can compete with the potential upside of a small company which is offering a large stake to early employees and just might make it huge. But a one time fluctuation to share price won't matter in the long run. Remember it's a linear adjustment and growth rates of investments are calculated by taking a geometric mean, not an arithmetic mean.

asanwal 16y ago
I think your comment on share buy backs is not steeped in reality. Moreoever, share price is not always tied to fundamental value of a company. For value stocks, it is. But for tech companies (growth stocks), it is often tied to implied or expected growth. And if Page can't articulate where that growth will come from, the stock price can get hurt.
- infinite8s 16y ago
  Yes, but the GP's point was that Google's growth as a company is independent of it's stock price. I almost hope that Wall Street doesn't look favourably on Google for a while - it means that the stock will be a (relative) bargain (if Page is able to execute on his un-articulated long-term vision).