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This is wrong. If Amazon earns $1bn extra profit the market cap of the companies shares could/should increase at least $1bn (depending on how it was made, and a

by nly 5y ago

This is wrong. If Amazon earns $1bn extra profit the market cap of the companies shares could/should increase at least $1bn (depending on how it was made, and any future prospects for repeating the win). However, no money is transferred to shareholders unless Amazon do a buy back or issue a dividend, it's just a revaluation. If those shareholders starting selling, only market forces (belief in Amazon) keep the price up. Shareholders can't demand their share of that $1bn in most cases, short of suing the company. Stocks can and do trade below book value. Companies with net $1bn in the bank can have a market cap below $1bn in inefficient markets.

diordiderot 5y ago
With a high enough net worth you don't need liquid assets, large banks provide <1% interest rate loans that get paid off by your estate. Saves on taxes as well
Godel_unicode 5y ago
It's not market inefficiency causing that, but rather expected value. If a company has $1bn in the bank and you expect them to squander it, then you'd be foolish to value them based off of it. This same logic explains the value of Amazon; they plow profits back into the business, making the future business bigger and more valuable. Their shareholders clearly agree with that type of longer-term thinking and have rewarded Amazon's growth with giant valuations repeatedly over the years.