Re:Income inequality today may be higher today than in any o...
by mcguire on Saturday July 02, 2016 @10:48AM
(#12022738)
"...the stock market is, for the large part, a zero sum game, unless an IPO is made."
An IPO takes some money out of the market, to the pre-IPO investors in the company, but a much bigger impact is made by dividends.
Here's a thought experiment for you: A company, A[1], IPO's. It's investors take some cash, the rest goes into A. A is a fantastic success and eventually grows to be the largest company in the world, market-capitalization-wise. Then, like all things mortal, it begins to slide into obsolescence, obscurity, and eventually bankruptcy and dissolution. Throughout its lifetime, following the best advice of economists[2], it never pays a dividend.
Anyone investing in A's stock is playing a quintessential zero-sum game: they're betting A will go up before it goes down permanently.
[1] No offense to Agilent.
[2] The goofy "double taxation" argument. The "it's no longer a growth company" argument (causing an immediate collapse in A's stock price). Etc.
An IPO takes some money out of the market, to the pre-IPO investors in the company, but a much bigger impact is made by dividends.
Here's a thought experiment for you: A company, A[1], IPO's. It's investors take some cash, the rest goes into A. A is a fantastic success and eventually grows to be the largest company in the world, market-capitalization-wise. Then, like all things mortal, it begins to slide into obsolescence, obscurity, and eventually bankruptcy and dissolution. Throughout its lifetime, following the best advice of economists[2], it never pays a dividend.
Anyone investing in A's stock is playing a quintessential zero-sum game: they're betting A will go up before it goes down permanently.
[1] No offense to Agilent.
[2] The goofy "double taxation" argument. The "it's no longer a growth company" argument (causing an immediate collapse in A's stock price). Etc.