Re:Alphabet overtakes Apple to become most cash-rich company
by ajross on Friday August 02, 2019 @03:13PM
(#20595728)
> On the flip side, having a big cash hoard is bad for your investors' returns.
This is absolutely true, but sort of misses the point. What happens in practice is that such stocks end up being disfavored and investors prefer to buy other securities with better dividends. Which has the effect of depressing the share price. Which has the effect of making it harder for the company to raise money via issuing debt or stock.
...which the company doesn't care about in the first place, because it's sitting on a truck load of cash and doesn't need to raise money.
Honestly, the jury is very much out on whether or not this kind of behavior is bad for companies in a micro sense. Really all it means in practice is that these companies haven't been able to find a way to invest this money productively, they're out of ideas to purse, or markets to expand into. And that's bad, but it's not bad because of cash.
In a macro sense, though, the argument is clearer: all that money sitting around doing nothing (well, nothing but sitting around in safe investments) does nothing for the GDP as a whole, and in particular it does nothing for the bulk of the population with little to no investment holdings.
This is absolutely true, but sort of misses the point. What happens in practice is that such stocks end up being disfavored and investors prefer to buy other securities with better dividends. Which has the effect of depressing the share price. Which has the effect of making it harder for the company to raise money via issuing debt or stock.
...which the company doesn't care about in the first place, because it's sitting on a truck load of cash and doesn't need to raise money.
Honestly, the jury is very much out on whether or not this kind of behavior is bad for companies in a micro sense. Really all it means in practice is that these companies haven't been able to find a way to invest this money productively, they're out of ideas to purse, or markets to expand into. And that's bad, but it's not bad because of cash.
In a macro sense, though, the argument is clearer: all that money sitting around doing nothing (well, nothing but sitting around in safe investments) does nothing for the GDP as a whole, and in particular it does nothing for the bulk of the population with little to no investment holdings.