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> Would you believe those 999,999 non-voting shares are worthless? If the owner of the company had shown no indication of ever wanting to pay a dividend, and i

> Would you believe those 999,999 non-voting shares are worthless? If the owner of the company had shown no indication of ever wanting to pay a dividend, and if there was no reason to assume the company would ever be liquidated, then yeah -- there is no reason for those shares to have any non-zero value. Future cash flows are only relevant insofar as shareholders can receive or influence them. If those 99999 shares have any value it's because they're the official baseball cards of the company, and baseball cards' values increase when the player on the front performs well.

JumpCrisscross 13y ago
> If the owner of the company had shown no indication of ever wanting to pay a dividend... future cash flows are only relevant insofar as shareholders can receive or influence them The stock of a company which will never pay out any dividends is worthless. The company's profits will go to everyone - bondholders, suppliers, customers, employees - except the shareholders. This will continue until liquidation, at which point the shareholders will be impaired or wiped out. If a stock has value, voting or not, someone expects dividends. Investors may think management is bluffing - then both classes of stock would receive the same dividends. Or they may think they can coerce management into paying a dividend. This would create a contest of control. A temporary spread between the two classes would emerge. The contest of control has two possible outcomes. Management could forever resist the shareholders, in which the value of both classes is zero. Or shareholders could win, pay a dividend and restore parity between the classes. Why does Google say it will never pay dividends? Because our markets punish growth companies acknowledging slowing growth. Announcing dividends is a sign of slowing growth. It seems like a specific type of investor invests in growth companies. When growth slows those investors hand their shares over to a different set of investors, value investors. The trade-off is tricky, and often involves proxy fights and management changes.
- slowjoe 13y ago
  The reason for not paying a dividend is that cash distributed that way is taxed more highly than cash distributed in a share buy-back. I agree with you that if no dividend is payed and shares will not be bought-back, the company is effectively worthless.
- jessaustin 13y ago
  The discussion has referenced management owning the voting shares. Such shares have value, for management or any other party that may be paid for services provided to the company, even if they never pay dividends, because self-dealing.

JumpCrisscross 13y ago

> If the owner of the company had shown no indication of ever wanting to pay a dividend... future cash flows are only relevant insofar as shareholders can receive or influence them The stock of a company which will never pay out any dividends is worthless. The company's profits will go to everyone - bondholders, suppliers, customers, employees - except the shareholders. This will continue until liquidation, at which point the shareholders will be impaired or wiped out. If a stock has value, voting or not, someone expects dividends. Investors may think management is bluffing - then both classes of stock would receive the same dividends. Or they may think they can coerce management into paying a dividend. This would create a contest of control. A temporary spread between the two classes would emerge. The contest of control has two possible outcomes. Management could forever resist the shareholders, in which the value of both classes is zero. Or shareholders could win, pay a dividend and restore parity between the classes. Why does Google say it will never pay dividends? Because our markets punish growth companies acknowledging slowing growth. Announcing dividends is a sign of slowing growth. It seems like a specific type of investor invests in growth companies. When growth slows those investors hand their shares over to a different set of investors, value investors. The trade-off is tricky, and often involves proxy fights and management changes.

slowjoe 13y ago
The reason for not paying a dividend is that cash distributed that way is taxed more highly than cash distributed in a share buy-back. I agree with you that if no dividend is payed and shares will not be bought-back, the company is effectively worthless.
jessaustin 13y ago
The discussion has referenced management owning the voting shares. Such shares have value, for management or any other party that may be paid for services provided to the company, even if they never pay dividends, because self-dealing.