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The way you phrased your opposition made it sound like you think that shareholders care if a company has positive net income. However, the whole point of this d

by lcw 4y ago

The way you phrased your opposition made it sound like you think that shareholders care if a company has positive net income. However, the whole point of this discussion is that shareholders have no vested interest in the financials of the company in cases like Uber. There is really no correlation in these companies being more profitable and shareholder wealth. Generally the only money that goes to shareholders from a companies financial performance is dividends anyways, which obviously Uber would never do yet it made people rich.

gruez 4y ago
>The way you phrased your opposition made it sound like you think that shareholders care if a company has positive net income. Technically that's true, in the sense that at the end of the day, the only thing that matters is what their shares are worth, not how well the company is doing. However, the value that someone else is willing to pay for the shares can be expected to be based on how well the company is expected to do. There are exceptions to this, of course (eg. GME), but for uber it's at least somewhat plausible that their valuations can be justified by the expectation of future earnings. You don't have to agree with this, but a risky investment isn't evidence for "system in which the success or failure of a company is of no relevance to its "value"". >However, the whole point of this discussion is that shareholders have no vested interest in the financials of the company in cases like Uber. There is really no correlation in these companies being more profitable and shareholder wealth. Generally the only money that goes to shareholders from a companies financial performance is dividends anyways, which obviously Uber would never do yet it made people rich. The companies are being valued for their future profits.
- lcw 4y ago
  I agree with your first point. I actually figured that we were in agreement here. I was just saying the phrasing of your comment is what triggered the clarifying questions, because I had the same clarifying questions when I first read your comment. I would have agreed with you on your second statement back in the 90's in regard to companies being valued on their future profits mostly, but that's obviously not true anymore. I think Tesla is the most extreme example of this. You have a car company that has a 200+ p/e ratio and has an order of magnitude higher market cap then many of it competitors that sell more cars. I have heard it all about how they are an energy company or a battery company or a software company, but the reality is shareholders are gambling on Elon, and Tesla because it's popular. Tesla has proven no market that will grow their earnings 100x in the next 10 years that would warrant a risky technical based investment taking into account competitors. Honestly, it's the same as GE saying that in 10 years they will have a nuclear fusion reactor to pump their market cap by 10x putting them in line with Tesla, which is a more plausible scenarios than Tesla actually diminishing their P/E ratio through earnings growth in a meaningful way over that same period of time.
- chrischen 4y ago
  Actually GME is a perfect example of how the future profits expectations keeps stocks grounded in reality, otherwise GME would have kept going up. It was just a few gamblers that put it as high as it went, but ultimately forces brought it back down. Just like gravity, you cannot escape the fundamental forces grounding all objects.
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by lcw 4y ago

gruez 4y ago

>The way you phrased your opposition made it sound like you think that shareholders care if a company has positive net income. Technically that's true, in the sense that at the end of the day, the only thing that matters is what their shares are worth, not how well the company is doing. However, the value that someone else is willing to pay for the shares can be expected to be based on how well the company is expected to do. There are exceptions to this, of course (eg. GME), but for uber it's at least somewhat plausible that their valuations can be justified by the expectation of future earnings. You don't have to agree with this, but a risky investment isn't evidence for "system in which the success or failure of a company is of no relevance to its "value"". >However, the whole point of this discussion is that shareholders have no vested interest in the financials of the company in cases like Uber. There is really no correlation in these companies being more profitable and shareholder wealth. Generally the only money that goes to shareholders from a companies financial performance is dividends anyways, which obviously Uber would never do yet it made people rich. The companies are being valued for their future profits.

lcw 4y ago
I agree with your first point. I actually figured that we were in agreement here. I was just saying the phrasing of your comment is what triggered the clarifying questions, because I had the same clarifying questions when I first read your comment. I would have agreed with you on your second statement back in the 90's in regard to companies being valued on their future profits mostly, but that's obviously not true anymore. I think Tesla is the most extreme example of this. You have a car company that has a 200+ p/e ratio and has an order of magnitude higher market cap then many of it competitors that sell more cars. I have heard it all about how they are an energy company or a battery company or a software company, but the reality is shareholders are gambling on Elon, and Tesla because it's popular. Tesla has proven no market that will grow their earnings 100x in the next 10 years that would warrant a risky technical based investment taking into account competitors. Honestly, it's the same as GE saying that in 10 years they will have a nuclear fusion reactor to pump their market cap by 10x putting them in line with Tesla, which is a more plausible scenarios than Tesla actually diminishing their P/E ratio through earnings growth in a meaningful way over that same period of time.
chrischen 4y ago
Actually GME is a perfect example of how the future profits expectations keeps stocks grounded in reality, otherwise GME would have kept going up. It was just a few gamblers that put it as high as it went, but ultimately forces brought it back down. Just like gravity, you cannot escape the fundamental forces grounding all objects.
- deleted 4y ago
  [deleted]