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There's a ready-made textbook solution for a company that can't make efficient use of its cash: Return it to the shareholders, and let them find their own effi

There's a ready-made textbook solution for a company that can't make efficient use of its cash: Return it to the shareholders, and let them find their own efficient use for it. i.e. pay a dividend. Yes, he would be paying a lot of it to himself, but maybe his personal investment staff can put it to use for him. Most corporate managers would rather set their money on fire than pay a dividend. MZ is no different. Normally a hostile takeover would fix that problem, but he's got himself so wedged in there with the voting shares that a takeover may be impossible.

jjeaff 4y ago
Out of the question. A dividend would require both the corporation and the recipients to ... gasp ... pay taxes!
GianFabien 4y ago
There are two ways to price a stock: 1. On the basis of how much you expect a bigger sucker than yourself to pay for it. 2. On the basis of yield on your investment, aka dividend / share multiplied by some "reasonable" number, e.g. 15 which implies 7% interest rates. Since there seems to be fewer gullible investors, on the basis of dividend earnings, Meta is worth exactly zero. Time to pay a dividend or burn the cash. Which to even gullible investors looks bad.
- Cupertino95014 4y ago
  Excellent answer. The classical answer is "the value of all future dividends, discounted to the present." #2, in other words. The expectation was, even if it pays no dividends now, when it's really successful it'll start. Or often it's #1, as you said.
sp332 4y ago
Why would he take money out of Meta when what he wants is to fund VR R&D?
- Cupertino95014 4y ago
  "what he wants" is unfortunately the guiding light, since he has the voting shares, but the money belongs ultimately to the shareholders. Apple pays a dividend: 0.59% yield at current price. Microsoft pays one, 1.17% yield. They both recognized a long time ago that they couldn't promise the shareholders that the company would invest the money better than they could.

jjeaff 4y ago

Out of the question. A dividend would require both the corporation and the recipients to ... gasp ... pay taxes!

GianFabien 4y ago

There are two ways to price a stock: 1. On the basis of how much you expect a bigger sucker than yourself to pay for it. 2. On the basis of yield on your investment, aka dividend / share multiplied by some "reasonable" number, e.g. 15 which implies 7% interest rates. Since there seems to be fewer gullible investors, on the basis of dividend earnings, Meta is worth exactly zero. Time to pay a dividend or burn the cash. Which to even gullible investors looks bad.

Cupertino95014 4y ago
Excellent answer. The classical answer is "the value of all future dividends, discounted to the present." #2, in other words. The expectation was, even if it pays no dividends now, when it's really successful it'll start. Or often it's #1, as you said.

sp332 4y ago

Why would he take money out of Meta when what he wants is to fund VR R&D?

Cupertino95014 4y ago
"what he wants" is unfortunately the guiding light, since he has the voting shares, but the money belongs ultimately to the shareholders. Apple pays a dividend: 0.59% yield at current price. Microsoft pays one, 1.17% yield. They both recognized a long time ago that they couldn't promise the shareholders that the company would invest the money better than they could.