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"MicroStrategy could have gotten rid of its excess cash by paying a big dividend or buying back a ton of stock. Instead, the company made a big digital currency

"MicroStrategy could have gotten rid of its excess cash by paying a big dividend or buying back a ton of stock. Instead, the company made a big digital currency bet." I love that we live in a world excess income by a company is just expected to go to buybacks and not towards expanding operations and R&D.

unmole 6y ago
Expanding operations can quickly turn into managerial empire building. Pumping more capital into a business may or may not yield proportionate returns. If the money is returned to shareholders, they are now free to deploy the capital how they see fit. This could be for personal consumption, investing in new companies or funding R&D. All of these are positive outcomes for society at large. But I fail to see what positives can come from putting $425MM into a volatile and mostly speculative digital asset.
joelwilliamson 6y ago
That's the whole point of a joint stock company. If capital is never returned to investors, why would they invest in the company in the first place?
- SQueeeeeL 6y ago
  I think stock is supposed to be like gold, you invest in the value of gold. As long as it's a valuable asset, there will be demand. The idea of explicitly returning value to investors wasn't common until the 1980s
  - joelwilliamson 6y ago
    > The idea of explicitly returning value to investors wasn't common until the 1980s Dividends were very common pre-1980. What makes you think they weren't? > I think stock is supposed to be like gold, you invest in the value of gold. The value of a stock comes from the possibility of capital return from the company. If the company never gives anything to shareholders, the value of a stock is no more than the paper it's printed on.
    - SQueeeeeL 6y ago
      I was mostly talking about stock buybacks https://www.forbes.com/sites/aalsin/2017/02/28/shareholders-should-be-required-to-vote-on-stock-buybacks/?sh=5a5d42806b1e https://www.forbes.com/sites/aalsin/2017/02/28/shareholders-... Dividends were often a very small piece of a companies expenses, just to incentivize long term holding of shares, not short term seeking of profits
      - joelwilliamson 6y ago
        A buyback is just a way to structure a dividend for better tax treatment. Do stock buybacks and dividends form a larger fraction of corporate earnings now than they did historically?
nwah1 6y ago
That would only make sense to do if they believed in their own business model.
gamblor956 6y ago
Returning profits to shareholders was the historical default. It's only recently that companies have decided that pursuing endless (and often pointless, see Google) expansion is better than paying dividends, and generally this behavior is mostly tech companies.

unmole 6y ago

Expanding operations can quickly turn into managerial empire building. Pumping more capital into a business may or may not yield proportionate returns. If the money is returned to shareholders, they are now free to deploy the capital how they see fit. This could be for personal consumption, investing in new companies or funding R&D. All of these are positive outcomes for society at large. But I fail to see what positives can come from putting $425MM into a volatile and mostly speculative digital asset.

joelwilliamson 6y ago

That's the whole point of a joint stock company. If capital is never returned to investors, why would they invest in the company in the first place?

SQueeeeeL 6y ago
I think stock is supposed to be like gold, you invest in the value of gold. As long as it's a valuable asset, there will be demand. The idea of explicitly returning value to investors wasn't common until the 1980s
- joelwilliamson 6y ago
  > The idea of explicitly returning value to investors wasn't common until the 1980s Dividends were very common pre-1980. What makes you think they weren't? > I think stock is supposed to be like gold, you invest in the value of gold. The value of a stock comes from the possibility of capital return from the company. If the company never gives anything to shareholders, the value of a stock is no more than the paper it's printed on.
  - SQueeeeeL 6y ago
    I was mostly talking about stock buybacks https://www.forbes.com/sites/aalsin/2017/02/28/shareholders-should-be-required-to-vote-on-stock-buybacks/?sh=5a5d42806b1e https://www.forbes.com/sites/aalsin/2017/02/28/shareholders-... Dividends were often a very small piece of a companies expenses, just to incentivize long term holding of shares, not short term seeking of profits
    - joelwilliamson 6y ago
      A buyback is just a way to structure a dividend for better tax treatment. Do stock buybacks and dividends form a larger fraction of corporate earnings now than they did historically?

nwah1 6y ago

That would only make sense to do if they believed in their own business model.

gamblor956 6y ago

Returning profits to shareholders was the historical default. It's only recently that companies have decided that pursuing endless (and often pointless, see Google) expansion is better than paying dividends, and generally this behavior is mostly tech companies.