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Comment by cheschire | Hacker News Reader

Well, when the company issues shares, then the money goes into their account, right?

Meta was a $26 Bn net purchaser (opposite of issuer)

Buying back shares it sold at a lower price, right? The lifecycle of a share starts with the transfer of money to a company in exchange for a share. It ends with a buy back, ideally at a higher price.

But still, at the beginning it is a transfer into the company’s coffers.

The life cycle of a share starts at IPO. The S&P 500 does not add companies to its index until at least 12 months after IPO.

Also, Meta issued 180 MM new shares at $38/share at IPO. That’s ~$7 Bn. Which is less than 1/4th of what they repurchased just last year.

Between share repurchases and dividends, S&P 500 companies are putting money into the markets, not pulling it out.

> The S&P 500 does not add companies to its index until at least 12 months after IPO.

Unless you're SpaceX [0], then the rules have exceptions...

[0] https://finance.yahoo.com/markets/stocks/articles/elon-musks...

Markets can and do change rules from time to time. This rule change would apply to any new listing, not just SpaceX.

Yes, but it was done for spacex and it’s crooked

Why is it crooked? Do you understand why the rules are being changed?

I’m not sure what the justification is, but I assume it’s some flavor of “so index fund holders don’t miss out on returns”. It’s crooked because index inclusion drives massive flows at any price. SpaceX understands this and with so much money on the table probably exerted influence (maybe the big AI players contributed too). Passive funds don’t care about price (quite the opposite, they reward higher market caps in a feedback loop). But with an IPO, you’re supposed to let the market have some time to find the right price. Not to mention the changes related to profitability rules etc.

Agree with this sentiment. However, I think the S&P 500 fudged the rule to 6 months which I believe adequately straddles the line between 1. provides time for price discovery and 2. includes a large piece of the market that would otherwise be included if not for the seasoning cutoff.

Agree with you entirely with respect to other indexes including earlier than 6 months.

yes, if it sells them on the market.

The last time meta sold stock on the market was a primary stock offering in December 2013, roughly a year and a half after its initial public offering (IPO).

I find it crazy that so many people misunderstand this basic fact about how the market works.

100% correct, but I'll add that companies do use shares in other ways which also matter.

For example shares can be used for buying labor. Either as options or as grants, bonuses etc. It ultimately winds up in the public shares pool, but the first recipient receives it in place if company cash.

The second major use is in acquisitions. Buying other businesses using stock instead of cash is a useful tool often wielded. Again, not released onto the open market, but winds up there eventually.

Plus you can use them as loan collateral, balance-sheet improves and so on. So their price matters and their value to the business extends far beyond the IPO.

Companies buy back shares as a different way than dividends to enrich their shareholders.

Exactly: enrich shareholders at the expense of their own coffers.

> enrich shareholders at the expense of their own coffers.

This makes no sense. The coffers belong to the shareholders.

“belong” is a flexible word. You’re right in theory but depending on the situation money in your bank account is worth more to you than an equivalent amount of money in a company’s bank account (of which you are a shareholder).

Just like dividends.

In big tech’s case it’s mostly to offset massive stock compensation of executives and insiders

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