261–270 of 272 posts
At the risk of being boring, Amazon's "no profit" model works because profit is an accounting measure, not an economic measure. Amazon is increasing in value, but because they are investing in themselves, on paper (i.e. according to accounting measures) they are not profitable. All companies have a "book to market" ratio that indicates they are worth more as a company than accounting measures would suggest.
It'll be interesting to see how their profitability trends as they adjust their prices. I've seen a trend over the past year or more of dramatically higher prices for things I've previously purchased from Amazon. I can do a 1-for-1 comparison on receipts, and see the huge bump. In some cases, those products are more expensive everywhere, but in most cases, I'm able to find those items at a price close-to or better th…
i.e. the first time you buy something, you are comparison-shopping, and likely to choose an item that is particularly cheap at that moment.
When you go back a year later, you aren't comparison shopping -- you're looking to replace what you bought last time. And you may well find that whatever made it cheap in the past (promotion, overproduction, market conditions) no longer applies.
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Where "becoming a giant, profitable company" is another way of saying "paying their shareholders". Amazon is making money, for all intents and purposes they are profitable. They've just found something more interesting to do with that money than pay dividends. The opponent in this scenario is the shareholders, they're the ones who want to take the money away from Amazon. It's a very interesting dynamic, certainly not…
> The opponent in this scenario is the shareholders, they're the ones who want to take the money away from Amazon. Take the money away from Amazon? The shareholders are Amazon. It isn't Amazon's money, it's the shareholders. If/when they want dividends instead of re-investment (which doesn't seem to be the case yet), they are entitled to it.
You're correct in asserting that the shareholders are entitled to direct the board to do their will. However, you seem to be assuming that the publicly traded shares of Amazon a) have significant voting rights, b) are a large enough share to be significant, and c) are not held in majority by those within the company.
I can't find information on either of these three... so I continue to assume it's entirely possible that Amazon's publicly traded share holders are a minority, with little voting rights.
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The average person doesn't make use of communication satellites? Ok, maybe not directly, but without them you wouldn't be able to live sports on TV. http://www.spacex.com/news/2014/07/14/falcon-9-launches-orbc... http://www.spacex.com/news/2014/08/06/spacex-launches-asiasa...
Elon Musk did not invent communication satellites. In fact, he wasn't even born yet when they were invented.
I listened to a talk by Amazon's CTO, Werner Vogels, where he was explaining that Amazon's entire strategy is to build an infrastructure for itself, then rent that infrastructure out to its competitors. That way, increased competition can actually fuel your growth. The talk was about APIs, but Amazon views APIs as a general term: "Fulfilled by Amazon" is an example of a non-technical API. Likewise, I think Amazon's s…
Amazon has already set this up for books with their Kindle Direct Publishing platform[0]. Writers directly publish on Amazon (cutting out publishers) and their books are electronically delivered to customers' Kindles -> everything stays on Amazon.
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So if they will never pay dividends, why is their stock worth anything?
> So if they will never pay dividends, why is their stock worth anything? Because stock is a claim against the assets in the event of dissolution, so it should be valuable as long as the company is expected to have a positive net worth. Dividends are simply a mechanism allowing stockholders to realize value prior to dissolution. Of course, so is simply selling stock . Further, if Amazon runs out of good opportunities…
stock is a claim against the assets in the event of dissolution
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Blowing up competitors comes to mind.
I can find one reference to a claim from a Vacuum Oil Company mechanic that he was bribed to sabotage a still which caused a sabotage a still. The website appears to be an online edition of a book, and it looks less than reputable. Is this what you're referring to? http://www.micheloud.com/FXM/so/consolid.htm
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> So if they will never pay dividends, why is their stock worth anything? Because stock is a claim against the assets in the event of dissolution, so it should be valuable as long as the company is expected to have a positive net worth. Dividends are simply a mechanism allowing stockholders to realize value prior to dissolution. Of course, so is simply selling stock . Further, if Amazon runs out of good opportunities…
stock is a claim against the assets in the event of dissolution Holy crap. Stock makes sense now. Thank you.
But that's because as long as a corporation is solvent, stockholders either expect that it will have greater net value in the future or can find someone else who thinks that, making holding or selling the stock preferable to dissolution. But its the claim against assets in the event of dissolution that supports all that.
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Makes me think of Peter Thiel's line: "we like to invest in businesses that aren't making a profit, because they know what to do with their money". Businesses that are paying back profits via dividends/buybacks are communicating that they have more money than they know what to do with (at least Thiel would say so).
Some business are simply motivated by profit rather than making headlines with mercurial statements on TechCrunch.