7 ms·

More valuable than stock ex ante, obviously not always ex post. Since the price of a publicly traded stock reflects expectations about future valuations, but a

by pseut 13y ago

More valuable than stock ex ante, obviously not always ex post. Since the price of a publicly traded stock reflects expectations about future valuations, but also has some additional risk, the cash is usually going to be valued more. "indefensible" is too strong, "not true in every single possible case" might be more accurate. Even then, your examples aren't that helpful; an example of a publicly traded company whose shares were widely thought to be underpriced would be better.

riggins 13y ago
Cash is much more valuable than stock. Any CEO worth their salt would ALWAYS issue stock and never cash Here's the entire quote. Steven2012's claim is that cash is always more valuable than stock. He's dead wrong. If you don't believe me, maybe you'll believe Buffett on how Dexter Shoes was one of his worst deals ever. http://www.reuters.com/article/2008/03/01/us-berkshire-buffett-failure-idUSN2921504820080301 http://www.reuters.com/article/2008/03/01/us-berkshire-buffe... What I had assessed as durable competitive advantage vanished within a few years," Buffett wrote on Friday. "By using Berkshire stock, I compounded this error hugely. That move made the cost to Berkshire shareholders not $400 million, but rather $3.5 billion. In essence, I gave away 1.6 percent of a wonderful business -- one now valued at $220 billion -- to buy a worthless business." here's a more general discussion from Buffett on cash versus stock http://1nvestments.blogspot.com/2012/09/buffett-using-cash-versus-stock-in_12.html http://1nvestments.blogspot.com/2012/09/buffett-using-cash-v... Instead, our problem has been that we own a truly marvelous collection of businesses, which means that trading away a portion of them for something new almost never makes sense. When we issue shares in a merger, we reduce your ownership in all of our businesses -- partly-owned companies such as Coca-Cola, Gillette and American Express, and all of our terrific operating companies as well. An example from sports will illustrate the difficulty we face: For a baseball team, acquiring a player who can be expected to bat .350 is almost always a wonderful event -- except when the team must trade a .380 hitter to make the deal. Because our roster is filled with .380 hitters, we have tried to pay cash for acquisitions, and here our record has been far better.
- pseut 13y ago
  That's a better example, thanks for sharing it.

by pseut 13y ago

riggins 13y ago

Cash is much more valuable than stock. Any CEO worth their salt would ALWAYS issue stock and never cash Here's the entire quote. Steven2012's claim is that cash is always more valuable than stock. He's dead wrong. If you don't believe me, maybe you'll believe Buffett on how Dexter Shoes was one of his worst deals ever. http://www.reuters.com/article/2008/03/01/us-berkshire-buffett-failure-idUSN2921504820080301 http://www.reuters.com/article/2008/03/01/us-berkshire-buffe... What I had assessed as durable competitive advantage vanished within a few years," Buffett wrote on Friday. "By using Berkshire stock, I compounded this error hugely. That move made the cost to Berkshire shareholders not $400 million, but rather $3.5 billion. In essence, I gave away 1.6 percent of a wonderful business -- one now valued at $220 billion -- to buy a worthless business." here's a more general discussion from Buffett on cash versus stock http://1nvestments.blogspot.com/2012/09/buffett-using-cash-versus-stock-in_12.html http://1nvestments.blogspot.com/2012/09/buffett-using-cash-v... Instead, our problem has been that we own a truly marvelous collection of businesses, which means that trading away a portion of them for something new almost never makes sense. When we issue shares in a merger, we reduce your ownership in all of our businesses -- partly-owned companies such as Coca-Cola, Gillette and American Express, and all of our terrific operating companies as well. An example from sports will illustrate the difficulty we face: For a baseball team, acquiring a player who can be expected to bat .350 is almost always a wonderful event -- except when the team must trade a .380 hitter to make the deal. Because our roster is filled with .380 hitters, we have tried to pay cash for acquisitions, and here our record has been far better.

pseut 13y ago
That's a better example, thanks for sharing it.