4 ms·
What are the economics of buying into a stock that has a 51% stakeholder, and doesn't pay dividends, outside of "line goes up"? I know this is kind of a standa
by torlok 2y ago
What are the economics of buying into a stock that has a 51% stakeholder, and doesn't pay dividends, outside of "line goes up"?
I know this is kind of a standard in tech, but it still eludes me where the value of the stock is.
- cchance 2y agoLOL you act like the entire market isn't "line goes up" regardless of 51% or not. And no its not just tech
- torlok 2y agoYes, it's "line goes up", but more in the P/E ratio sense, where the price of the stock doesn't reflect the true value of the company, however outside of tech you can usually reason that there's either dividends being paid, or the stock has a base value because if a company performs, and the stock price is low enough, it's worth for another entity to buy it out and take control of it. This gives a stock some real value, and company performance has real impact on the price of the stock. In the case of tech comapnies, it's often no dividends, and the owner has 51%, so the stock gives no share of the profits, and no voting power.
- Jolter 2y agoWhy would they not pay dividends?
- rerdavies 2y agoSo they can invest in themselves. The usual reason.
- andrewla 2y agoTraditional answer is that there is future potential that they would issue more stock (to sacrifice their 51% stake) or at some point start to issue dividends.
- dukeyukey 2y agoRaspberry Pi has paid out about $50 million in dividends already to it's parent company.
- vasco 2y agoLine goes up is the same as dividends. If you genuinely don't know, you can easily find the reason why it's economically the same, while being fiscally more efficient to not emit dividends by doing a quick googling.
- torlok 2y agoYou completely missed the point of the question. They're not the same. Dividends give you a share of the company's profits, thus pay based on company performance. "line goes up" mechanics assume somebody will buy your stock because there's a shared illusion that stocks have value, even though they, in case of tech stock, don't pay dividends, and give no voting rights.
- vasco 2y agoIt is you who missed the point. Google the fiscal difference between dividends or no dividends and you'll understand. There's nothing preventing you from selling exactly as much % shares each quarter as you want to create your own dividend, specially with fractional shares. These days the difference is merely fiscal and people that say "if there's no dividends its all fake" seem to want to portray it as bad when for most people it's way better to let it compound and only sell and trigger taxable events when they want to. I don't see how the board of some company deciding when I have taxable events is an advantage if the company removes the same value of shares from circulation by doing a buyback. Dividends are just adding financial inefficiency and removing choice from the shareholder.
- torlok 2y agoSince you're still struggling, I'll try to be as clear as possible. Why does a stock have value if it doesn't give you a share of the company profits, or voting rights?
- vasco 2y agoYou're adding voting rights into the discussion when they are separate from dividends is something I don't understand. You can have voting rights and no dividend. Regarding the share of the profits I already explained. You have your share of the profits in form of liquid stock that you can decide to sell. It's the same thing.