How much is a share of Amazon worth considering they don't pay any dividends? Isn't this the same thing?
Bezos has 2 options. He can pay me $1 as a dividend or he can reinvest that $1 into his business and make my share worth $11.
His choice does not matter in the absence of taxes and other costs.
If he does not pay out a $1 dividend but I want a $1 dividend, I will sell 1/11th of my $11 share and get $1.
If he does pay out a $1 dividend but I do not want a $1 dividend, I will use his $1 payout to buy 1/10th of a $10 share and now own 1.1 share.
In both cases I have $11.
The difference between this and crypto is that crypto has no earnings. If SBF and his coinmaker friends want to pay me $1 on my $10 ("yield farming") they must do it by taking $1 from new investors to pay me. But who will pay those new investors?
>If he does pay out a $1 dividend but I do not want a $1 dividend, I will use his $1 payout to buy 1/10th of a $10 share and now own 1.1 share.
>In both cases I have $11.
If what you said was true then share prices would go up after earnings were announced by exactly the same amount of profits that were in the earnings report. In reality a company can release their report announcing their profit and the share price can decline so I think it's fair to say that a share price's value is largely based on speculation.
>The difference between this and crypto is that crypto has no earnings. If SBF and his coinmaker friends want to pay me $1 on my $10 ("yield farming") they must do it by taking $1 from new investors to pay me. But who will pay those new investors?
Yield can be sourced from trading/borrowing fees or in the event of liquidation the collateral that these traders provide. Yield can also be generated by performing some functions on a blockchain like validating transactions. Yield can also come from the "pre-mine" in instances where the coinmaker is offering yield farming.
I agree that this is the case in the short run. But I do not believe this is the case in the long run. And there are great investors out there who hold this view.
> Yield can be sourced from trading/borrowing fees or in the event of liquidation the collateral that these traders provide. Yield can also be generated by performing some functions on a blockchain like validating transactions. Yield can also come from the "pre-mine" in instances where the coinmaker is offering yield farming.
You may be right. The only issue is that when someone offers you a guaranteed 12% or guaranteed 20% annual return on your money in a near 0% interest environment then it seems too good to be true. And it was too good to be true in the case of that recently collapsed 'luna' coin which wiped out 45 billion of investor money.
I think it comes down to the fact that people typically buy shares in order to make a gain at some point in the future so they have to come up with a believable story as to why their desire will play itself out. Some peoples stories simulate reality better than others so they tend to do well in the stock market. Others shape the narrative so they do well also.
Ultimately though I think something is only worth what someone else will pay for it.
The original comment I replied to was horrified that people in the crypto industry would profit off something that they believed was worthless. They didn't acknowledge that this takes place all the time throughout society and ultimately it doesn't matter what a seller thinks something is worth since they can't predict the future or know what the buyer values about whatever they are buying. I think as long as a seller doesn't intentionally mislead a buyer as to what they are purchasing then they have done no wrong.
> You may be right. The only issue is that when someone offers you a guaranteed 12% or guaranteed 20% annual return on your money in a near 0% interest environment then it seems too good to be true. And it was too good to be true in the case of that recently collapsed 'luna' coin which wiped out 45 billion of investor money.
A high APY isn't the concern for me. It's who is offering the APY and how well is their platform engineered. Funding fees on exchanges are a lot more than 10% PA and there is no way to get a traditional loan from a bank to trade crypto on an exchange. That explains why a 10% APY for a coin pegged to the dollar is not uncommon in an environment where trade volumes are high. I would be more worried about a sustained contraction of the overall crypto market based on what I know/suspect about USDT (Tether).
As for the debacle that was UST/LUNA I think marketing a coin as "stable" when the stabilizing mechanism assumes no large outflows and no slippage is reckless at best.
If I promise to pay you $100 10 years from now, is that agreement worthless because you didn't get it today? No you discount the time factor into current value.
The people who got wiped out on growth tech don't understand this concept
To some people something is worth what someone is willing to pay them for it at the current moment.
To others it's worth whatever it is in the story they have concocted in their head.
And to lose a lot of money
Stock buybacks are one way that is theoretically equivalent to dividends. Amazon recently announced a $10 billion buyback which is about a 1% dividend for owners. [1]
Also, amazon has underlying assets worth 420 billion [2], which the the stock owners own. As Amazon grows, the assets/share also grow
https://www.cnbc.com/2022/03/09/amazon-announces-20-for-1-st...
https://d18rn0p25nwr6d.cloudfront.net/CIK-0001018724/f965e5c...
I replied elsewhere but this is the true value of something. What someone else is willing to pay for it.
> Also, amazon has underlying assets worth 420 billion
I always struggle with these valuations because like I said above the true value of something is what someone else will pay for it so I think they are an estimation at best.
I guess companies can be taken over and broken apart for their assets like private equity firms have become known for doing so these numbers do hold some weight. Though if liabilities grow to a level where the business files for bankruptcy these numbers are irrelevant to a shareholder since they are behind the creditors.
What no one mentioned here is voting rights. While the votes of small shareholders are largely inconsequential larger voters could on things that would benefit themselves financially so indirectly this can give value to shares.
This is true of anything. I own a used car, it is an asset, and has an estimated value that will only be verified/or disproven if I need to go through with selling it.
If a company is liquidated, share holders are indeed behind creditors in getting paid out, so they would not get this full value.
It seems that you understand it fully, what exactly is the struggle you are having?
Just the truthfulness and validity of the valuations.
The back and forth of these comments have helped clarify things. Thanks for your comments.
A share isn’t just some token, it conveys ownership of a public company.
This is true. While the company is operating it is at least worth assets minus liabilities.