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I would recommend taking a basic accounting course before commenting on how public company accounting works. It's actually a lot more complicated than "company
by pclmulqdq 3y ago
I would recommend taking a basic accounting course before commenting on how public company accounting works. It's actually a lot more complicated than "company has cash, shareholders have stock", and by trying to reduce things to simplistic scenarios where the stock and the cash are completely unlinked from each other, you are not describing real life in any way.
The practical reality for public companies is that cash and stock are pretty much fungible. You can issue shares and give them to Musk, or you can issue shares, sell them on the open market, and get cash to pay your employees. If you have excess cash, you can buy back shares from the open market. Companies actually frequently do this - most of them have a department called the "treasury" which, among other things, day trades their own stock (within limits set by public announcements) in order to get cash at a good price - but you never hear about it.
$1 of stock and $1 of cash are roughly equivalent in actual value. In both cases, the shareholders are dilluted by $1 extra.
- Workaccount2 3y agoMy man will say anything to avoid acknowledging that share compensation is not deducted from revenue. Anything to avoid acknowledging that shareholders pre-approved the transfer of those shares to execs. Company revenue is in trouble? Just do an offering! Stocks = cash! Surely ownership is fine with bankrolling dead weight.
- pclmulqdq 3y agoThat literally is how it works, though. Companies that are in trouble literally do stock offerings. Companies that are not in trouble also do small offerings to keep their cash on hand low while paying the bills. Also, I'm not arguing about the approval of the compensation package.
- Workaccount2 3y agoYou know what companies do way more frequently when they are in trouble? Layoffs. But when you are CEO you can inform the board of this magic money source called offering, where you can keep bloated headcounts and not lose profits. I'm sure they will listen to you.