4 ms·

I'd like to see a few recent examples of CEOs making decisions for the future health of the company that knowingly lower the stock price for more than 2Q.

by njovin 4y ago

nightski 4y ago
There are lots of examples of CEOs making decisions for the future health of the company that are rewarded by Wall Street. The trope that investors only care about the current quarter profits is just bs. In fact in my experience future growth potential is rewarded a lot more by Wall Street than consistent profits.
- SketchySeaBeast 4y ago
  I think this point would be helped with some examples.
  - creato 4y ago
    Amazon
  - WJW 4y ago
    - Any form of R&D spending. Biotech companies are an extreme case of this, many making no money at all for years until they get FDA approval or go bankrupt. A lot of companies will invest in new development of new machines in order to gain an edge in the long run. - Any form of expansion into new markets. Will take a lot of cash to get started and may take years before it becomes successful. - Most marketing for brands that you already know, to keep them "top of mind". Nobody needs ads to know that Coca Cola exists, but they still spend a ton on marketing to maintain their brand image and make sure that people hear about them regularly.
    - kritiko 4y ago
      I said this in another comment, but the gp is talking about stock price, not profits. Your examples seem to refer to P&L.
      - sokoloff 4y ago
        I think that stock price and profits have a relationship with a positive coefficient over a long time horizon.
jrd259 4y ago
Well, Amazon for one.
blackoil 4y ago
Zuckerberg did this. He correctly or incorrectly believes, Metaverse to be the future and so he invested in it knowing that short term profit may fall because of this.
- blitzar 4y ago
  He did so however on the basis that it would increase the share price. Facebook needed a narrative to pitch to shareholders, the metaverse was the one they selected.
  - sokoloff 4y ago
    Over the long run, yes, that was his belief (and job). I don’t think he did so expecting a share price benefit in the following 2 quarters, the premise of the question.
    - blitzar 4y ago
      The purpose of rebranding from Facebook to Meta was entirely for the short term share price.
- golemotron 4y ago
  He also has most of the voting shares. That means that as CEO he is not in conflict when maximizing value for the owner(s). He is the owner.
papito 4y ago
"Jeff Bezos explains to Amazon investors why no profits are a good thing" https://www.theverge.com/2013/4/12/4217794/jeff-bezos-letter-amazon-investors-2012 https://www.theverge.com/2013/4/12/4217794/jeff-bezos-letter...
- kritiko 4y ago
  "Making shareholders money" does not have to be synonymous with maximizing profits, does it? You want to maximize the stock price. Amazon and Tesla seem like examples where stock price and profits were not correlated.
NovemberWhiskey 4y ago
If by "the future health of the company", you mean "ability to generate more profit down the line" then it's kinda tautological that (at a micro-level) those decisions are not going to lower the stock price - given that said stock price is derived from the net-present value of future returns. That's of course assuming that the strategy is well-articulated and that the market understands it.
cloverich 4y ago
> that knowingly lower the stock price for more than 2Q. The question alone is a bit loaded, because stock price is meant to reflect the future prospects of the company -- its long term profitability. A better example might be making decisions that knowingly lower the profits for multiple quarters.

I'd like to see a few recent examples of CEOs making decisions for the future health of the company that knowingly lower the stock price for more than 2Q.

by njovin 4y ago

I'd like to see a few recent examples of CEOs making decisions for the future health of the company that knowingly lower the stock price for more than 2Q.

nightski 4y ago

There are lots of examples of CEOs making decisions for the future health of the company that are rewarded by Wall Street. The trope that investors only care about the current quarter profits is just bs. In fact in my experience future growth potential is rewarded a lot more by Wall Street than consistent profits.

SketchySeaBeast 4y ago
I think this point would be helped with some examples.
- creato 4y ago
  Amazon
- WJW 4y ago
  - Any form of R&D spending. Biotech companies are an extreme case of this, many making no money at all for years until they get FDA approval or go bankrupt. A lot of companies will invest in new development of new machines in order to gain an edge in the long run. - Any form of expansion into new markets. Will take a lot of cash to get started and may take years before it becomes successful. - Most marketing for brands that you already know, to keep them "top of mind". Nobody needs ads to know that Coca Cola exists, but they still spend a ton on marketing to maintain their brand image and make sure that people hear about them regularly.
  - kritiko 4y ago
    I said this in another comment, but the gp is talking about stock price, not profits. Your examples seem to refer to P&L.
    - sokoloff 4y ago
      I think that stock price and profits have a relationship with a positive coefficient over a long time horizon.

jrd259 4y ago

Well, Amazon for one.

blackoil 4y ago

Zuckerberg did this. He correctly or incorrectly believes, Metaverse to be the future and so he invested in it knowing that short term profit may fall because of this.

blitzar 4y ago
He did so however on the basis that it would increase the share price. Facebook needed a narrative to pitch to shareholders, the metaverse was the one they selected.
- sokoloff 4y ago
  Over the long run, yes, that was his belief (and job). I don’t think he did so expecting a share price benefit in the following 2 quarters, the premise of the question.
  - blitzar 4y ago
    The purpose of rebranding from Facebook to Meta was entirely for the short term share price.
golemotron 4y ago
He also has most of the voting shares. That means that as CEO he is not in conflict when maximizing value for the owner(s). He is the owner.

papito 4y ago

"Jeff Bezos explains to Amazon investors why no profits are a good thing" https://www.theverge.com/2013/4/12/4217794/jeff-bezos-letter-amazon-investors-2012 https://www.theverge.com/2013/4/12/4217794/jeff-bezos-letter...

kritiko 4y ago
"Making shareholders money" does not have to be synonymous with maximizing profits, does it? You want to maximize the stock price. Amazon and Tesla seem like examples where stock price and profits were not correlated.

NovemberWhiskey 4y ago

If by "the future health of the company", you mean "ability to generate more profit down the line" then it's kinda tautological that (at a micro-level) those decisions are not going to lower the stock price - given that said stock price is derived from the net-present value of future returns. That's of course assuming that the strategy is well-articulated and that the market understands it.

cloverich 4y ago

> that knowingly lower the stock price for more than 2Q. The question alone is a bit loaded, because stock price is meant to reflect the future prospects of the company -- its long term profitability. A better example might be making decisions that knowingly lower the profits for multiple quarters.