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You are deeply mistaken in thinking that share prices have no influence on value creation. Let me explain using your example. Imagine that GOOG has a few proje
by 1gor 18y ago
You are deeply mistaken in thinking that share prices have no influence on value creation. Let me explain using your example.
Imagine that GOOG has a few projects in the pipeline. A few bad ones, and a few brilliant ones.
When GOOG share price is at 700, GOOG can issue 100 shares and raise 70000. Plenty of money to throw at good and bad projects.
If GOOG share price was at 200 they would raise less than 1/3 of the money, and be very picky at what projects to fund. Only the best project would get funded.
Think about how much resources are wasted in the society though misallocation of capital due to inflated asset prices. You may look at short sellers in a completely new light.
- sokoloff 18y agoIf GOOG could tell, with certainty, ahead of time what projects were brilliant and which ones were bad, they'd only fund the brilliant ones in the first place, right? The notion that GOOG is knowingly chasing bad projects solely because their stock price is high seems absurd. I think it's more likely that they just don't, and can't, know ahead of times what's going to stick.
- condor 18y agonever said capital (or access to capital) doesn't influence value creation. it can negatively or positively affect value creation depending on how that capital is allocated. however the act of capital allocation does not create value. why is that so difficult to understand? im not saying capital allocation isn't important, however its one means to an end (value creation).