Re:S&P 500 to exclude Snap after voting rights debate
by woopwoop on Tuesday August 01, 2017 @06:14PM
(#14905920)
My impression is that modern firms "pay dividends" by doing share buybacks, which are equivalent to dividends but taxed less (I'm nowhere near an expert here, if that isn't clear). If you don't have a voting share or some kind of contractual guarantee, though, what's to stop the voting shareholders from deciding to just buy only voting stock in the event of a buyback?
Re:S&P 500 to exclude Snap after voting rights debate
by mcguire on Tuesday August 01, 2017 @07:36PM
(#14906514)
Note that the dividend effect is dependent on the share price, and may only be valid if you sell shares within a short time of the buy back.
Re:S&P 500 to exclude Snap after voting rights debate
by toast0 on Wednesday August 02, 2017 @01:17AM
(#14908119)
Outside of taxation, a buy back is essentially equivalent to a dividend that you're forced to reinvest. At the end of the day, all of your shares are worth a smidge more of the company. Certainly, the price could go down after a buyback, same as if you reinvested the dividend.
The benefit for shareholders is that the shareholder can decide when to recognize that as a capital gain; the negative for shareholders is that they can't recognize only the portion of their capital gains related to the buy back.
Re:S&P 500 to exclude Snap after voting rights debate
by mcv on Wednesday August 02, 2017 @07:00AM
(#14909538)
The voting shares give control over the company. If another company wants to buy a company in order to control its direction, they non-voting dividend-paying shares are worthless to them. They need voting shares.
And indeed, non-voting shares in a company that doesn't pay dividends seem worthless to me. And who decides whether the company pays dividends? Not the non-voting shares.
Non-voting shares could be fine, but they could also turn out to be a scam, depending on the wishes of the people who control the company.
Why would a voting share in a firm without dividends or with no assets be worth anything? Voting just gives you input into a future course which will hopefully give the firm assets (from which it may or may not issue dividends), but the voting shareholders will presumably pursue that anyway, and if you don't have better ideas than they do on how to do that, your vote isn't actually netting you any additional value.
All stock is based on the (possibly expected future) value of a share of the net assets of the company. There is nothing else that could provide it value. Voting rights are just a way to have input on how the company will try to realize value and how and when it will distribute it to those entitled to it.