Intrinsic value of stocks

>ok. then i don't sell 49%. only sell but noone ever gets any actual benefit from being a minority shareholder in my company, it's purely speculation.
>they don't pay out any dividends, stockholders get 0 ACTUAL benefit from being monority owners of their companies. the only thing giving value to their stocks is speculation.
No, it's not speculation, it's literal ownership of your company. The company's worth is largely determined by its earnings. Look at pic relate. Do you think stockholders give a fuck about dividends?
Plus if you really fuck your stockholders over they can sue you because ownership gives them legal rights.

>say i deal with serious people, who actually want to make money. why would they give a crap about my company's public valuation when they know it's fallen while my actual revenues went 100x, thus have no connection with my company's success?
If your revenue would grow that much the stock's value would, too, so investors would never dump it. That wouldn't make any sense.
Besides when I say financing deals I'm talking about getting lower interest rates on financing. Finance analysts care a lot about your stocks worth.
So when your stock gets dumped you have to pay higher interest rates which in turn lowers your revenue and so on.

>but once i share my majority, i don't get to keep all the revenue for myself.
You don't get to keep the revenue in any case. What you get to keep is the profit which again is only a fraction of the revenue.
Facebook only makes less then $4B in profits while being worth $500B. It just makes zero sense to fuck your investors over.

>Plus if you really fuck your stockholders over they can sue you because ownership gives them legal rights.

well, but if i just don't pay them shit, they have no right to sue. still, there is 0 actual value for their investment.

>If your revenue would grow that much the stock's value would, too
yes. without any real reason beside speculation.

>you'd never grow at a significant rate without investors.

25% isn't an unusually low share for a serious investor though, no?

>You don't get to keep the revenue in any case. What you get to keep is the profit which again is only a fraction of the revenue.

ok, replace the word 'revenue' with 'profit' (duh)

You're missing the part to where you will have some fine print regarding exactly how you plan to handle how dividens are processed less you be sued by the guy you're trying to scam. Otherwise you've scammed someone and just pray that you never ever need outside financial help again.

You're arguing in a cricle, mate. Last reply.
>well, but if i just don't pay them shit, they have no right to sue. still, there is 0 actual value for their investment.
>yes. without any real reason beside speculation.
Stocks are ownership of a fraction of the company which is worth something. It's that easy.
>25% isn't an unusually low share for a serious investor though, no?
Yes, it is for large companies. The founders of multi-billion dollar companies don't even have majority ownership, far from it.
>ok, replace the word 'revenue' with 'profit' (duh)
It's a monumental difference.

If it'd be so easy to keep everything for yourself every founder would do it. But no one does.
Investors are incredibly important for a company, especially in the beginning, and thus they have a lot of power.
Without them you won't get anywhere.

I think he's getting around to asking: without a dividend what real value does owning a stock like Google or Amazon have other then hopefully selling it to another person at a higher valuation?

I myself would say none. We buy all stock on speculation, dividend or not. We try and pick the stocks that we speculate will rise and we can sell them to the next guy at the highest profit margin possible and he buys it doing the same thing.

Owning a share of Google brings no REAL value to my net worth until I sell it for cash. Google could go the way of GE a year from now, it's all just speculation. But at least with a dividend you get to share in the profits of the company you own share value be damned your still making cash.

By that logic everything is speculation because everything has a chance of being worth nothing by tomorrow, stocks, real estate, cash etc.
The current worth of something is determined by the future earnings it's expected to bring in. That applies to everything.

but real estate has actual usecase. someone will be willing to provide work/goods to be able to live in a house, or you can live in it saving yourself work/goods. real-estate has value outside of speculation.

>It's a monumental difference.
makes 0 difference in the context. i'm just not a native english speaker.

>Stocks are ownership of a fraction of the company which is worth something. It's that easy.
still haven't pointed out what it's worth, just keep saying it's worth something.

>You're arguing in a cricle, mate. Last reply.
yes that's me and not you lol

>The founders of multi-billion dollar companies don't even have majority ownership, far from it.

ok. what is the probaility of a person owning $500k worth of stocks in a company valued @ $100b will ever have his share provide ANY value outside of speculation

Good fucking points OP. I was brought into thinking stocks have value because of the hypothetical 51% ownership. But indeed, many companies keep the 51% to the founders of the company. And indeed, 51% is not even guaranteed dictatorship. And yes, owning a share when a company gets liquidated is basically worth nothing. All the other benefits (dividends, voting rights) are artificial and up to the company to decide. So, in the end you as a stockholder get whatever scraps the company currently decides to give you, plus the few gimmicky but ultimately not that worthwhile benefits that the current law guarantees you.

In the end the value of the stock is in no way tied to the company and its revenue. Stocks of companies with hardly any revenue are currently booming, it's clear that the revenue of the company is in no way tied to the stock prices. So essentially the only thing that gives stocks value is that people believe their value should go up when the company does well. That's literally fucking it. So, they're not backed by fundamentals any more than fiat.

The only thing that can have intrinsic value is something that is limited and possesses properties that make it attractive to own to somebody for some reason. Say, metals are rare and needed for doing things, so it's natural that their value is greater than 0 since there's demand and limited supply (not that they can't become overvalued with respect to their intrinsic prices). Can you say the same about stocks? No you can't. Intrinsically, they're worthless.

This makes you wonder how such a large scheme as stocks became so successful, and why the same people think crypto can't attain the same kind of status / speculation value, even though it at least has some intrinsic value unlike stocks.

Also let's note that dividends decrease the value of the stocks of the company essentially an equal amount to the dividends paid. Dividends aren't valuable, and companies don't have to pump their revenue into them. They can just as easily just keep the profits to the people who were actually participating in the company and producing the real-world value. The stockholders are just speculators.

Just because you call it speculation doesn't make it so. A stock is not a piece of paper.
It's a part ownership of a company which means you own part of their buildings, their land, their staff, their manufacturing capabilities etc.
All those things have a real value that can be quantified. And you can sell and buy stocks at the value you deem appropriate for the company.

Buying company stock also doesn't really help the company all that much after IPO. If the company sold everything it gains nothing from stocks, if the company holds 51% it can't sell the rest unless it's prepared to lose majority. You could say that pumping the stock price and the value of the company's remaining stock is supporting the company, though.

So I guess if a company sells 51% of its stock, stocks can have intrinsic value because there's a small chance that somebody wants to acquire them back from you. If a company doesn't sell 51%, there's a small chance that the company might want to sell some of their stocks later when their value increases and offer somebody else the chance to gain 51%. But are these not quite the gimmicks? Does that justify the current valuation of company stocks?

The other anons point was that owning a share in a company that doesn't pay dividends has no practical value besides that given to it by speculation.

If I own a hamburger, I can eat it to fuel my body. If I own a laptop, I can waste time on biz. If I own a non-divident paying stock, I can...? Claim a brick from the head office?
Of course its only value is speculative. So is the value of crypto and fiat

I wouldn't say that about crypto and fiat. Fiat is "limited" and a useful medium of exchange, crypto is fiat + bells and whistles. Maybe stocks do have some intrinsic value to them as well.

But the question is, how grossly overvalued are stocks, crypto or gold right now in respect to their fundamental value? I think they're all obviously overvalued so far. Call me biased but right now I think crypto is the least overvalued and has more room for speculation once it delivers more fundamental value.

You were doing so well, then you invalidate your entire argument by calling gold inherently valuable. Gold is valueble for literally the exact same reason that Google stock is, the reason that you yourself stated: people want it.

Either speculative value is real or it isn't bro

Um yeah, stocks and cash are pure speculation. I've gone over why I think stocks are. The value of cash is only backed by the faith you have in it, that you can trade that paper in for a good or a service later on. Otherwise it's just paper.

When you say "The current worth of something is determined by the future earnings it's expected to bring in" you are defining the word speculation.

Housing, food, and certain goods and services have real intrinsic value that will not go away. Stocks, cash, and materials literally waver in value day by day, hour by hour, and in most cases minute by minute all because the people speculate on what they are worth.

After rereading your comment it occurs to me that you probably meant industrial metals, my bad.

I was only refuting your claim that the value of non dividend stocks wasn't purely speculative. Whether or not the market is overvalued, or if speculative value is "real value" are seperate questions entirely

Welp, thanks I guess. I think gold is valuable mostly because it's useful in tech. Same way nickel is. But the real fundamental valuations of them compared to other things that are considered valuable (not that you could value something absolutely instead of just making comparisons) are significantly lower than what their current valuations are. Anything outside of the value driven by fundamental use is speculation value.

>It's a part ownership of a company which means you own part of their buildings, their land, their staff, their manufacturing capabilities etc.
>All those things have a real value that can be quantified.
If someone owns 10% of amazon, can they say at a shareholder meeting or something "hey yo I want to sell 10% of amazon's buildings and get the profits off that in my pocket, and also fire 10% of the people"?
I think OP asks a legit question, I've wondered the same thing myself.

>I was only refuting your claim that the value of non dividend stocks wasn't purely speculative. Whether or not the market is overvalued, or if speculative value is "real value" are seperate questions entirely
You're right and I don't disagree. I was trying to consider any possible fundamental value they have, but the truth is it all amounts to very little if anything in the end.

I fail to see the intrinsic value of any crypto or anything intangible for that matter.

Please educate me I honestly don't see how having 20k worth of USD in crypto on a hard drive will serve me better then 20k in my bank. Other then everyone speculates the value of crypto to boom.

forest for the trees, user.
forest for the trees.

It makes zero difference whether it's digital or a piece of paper. The value fiat and crypto have is the fact that they're perceived to have value. And because of that, they have value as vehicles of value transfer. It's kind of circle logic, but once something gains value like that it will also likely retain its value at least to some degree. But it's never backed by something fundamental, not any more than stocks.

This all really makes me even more interested in buying some land or real estate.

We are in a speculation bubble. Stocks, crypto, and even the tangible housing market. It has gotten out of control. You could equate it all to selling stars, you gain nothing tangible by owning/naming a star. Yet over the past 200 years the star naming business has been booming. It can’t last.

But there would be no buyers to dump on. Why would I buy a share of a company that didn't pay out any dividends or buy back shares. And none of this could be negotiated because of the 49% float. I would probably buy them for pennies on the off-chance that OP died prematurely and was replaced by a benevolent CEO.

Dividends are extremely valuable...

For a company like coke, McDonald's, or Pfizer that have gotten so big there's very little room to grow they attract new investment and keep the stock relevant. It shows everyone from lenders to investors that they have healthy enough profit margins to give back to the owners of the company 5%of the total profit brought in.

The value of a dividend is baked in to the stock price, you take the dividends away or even skip a payment and your stock takes a nose dive. This is beside the face that I have never seen a company with any officer without stock in said company. The people running the company want the stock to do well and want that tasty dividend themselves.

Also compounding interest is magic and should be worshipped with blood sacrifice.

When the economy is thriving, speculation pays off. Things with fundamental value retain their value if they're not speculated on, so they'll lose value compared to everything else. When hard times come, people realize the speculation is worthless, and the speculated assets will massively drop in price. That's when things with fundamental value gain value compared to everything else. Isn't that how it goes?

Makes you wonder how smart it is to keep all your worth in fiat, considering its value hinges on the other speculation bubbles not popping too hard.

You and I are talking about different kinds of value. I'm talking about monetary value.
A company's value can be evaluated through different approaches, for example by evaluating all its assets or its estimated earnings.
Depending on that the price of a stock can be determined. Now is there speculation around stocks? Yes. Are stocks themselves speculation? No.

Your definition of value is restricted to what you can consume now, food, shelter etc. However who produces that food? Who builds those buildings?
Are companies worth nothing just because you can't directly consume them? That's a very shortsighted definition of value.
And as I said EVERYTHING has a chance of being worth nothing by tomorrow, even buildings, that's why there's insurance for basically everything.
Either way it's more of a philosophical question than anything.

Such things would be determined BEFORE investing, not after. And yes dumping means that it's value would plummet obviously. But there's always buyers. Even Bitconnect still exists, doesn't it?

The board of Directors are responsible for running the company responsibly and profitably. That would include decisions relating to downsizing and selling off assets, as a shareholder there would be meetings where you can make suggestions like this, but this suggestion would most likely be deemed unwise for the company.

As for OP's initial question an investor attaches different values to various elements in a company. It could be the brand, profitably, dividends, potential for growth, ROI.
You holding the profits and paying yourself a huge bonus could deter some, but others would still value the growth the company has and the idea that you would continue making a huge profit.

I'll admit I don't know what will happen if the 49% start selling and no one purchases the shares what would happen as the business should still be operating per normal - assuming you have no other debt obligations.

>Isn't that how it goes?
Precisely that is why companies like Coke and McDonalds have been going for years.
Sorry if these examples aren't adequate because I'm not an Ameriburger.

You are forgetting there is no "living off profits" when it comes to big businesses.
The market is so aggressive if you don't expand, adapt and innovate rapidly you will eventually perish.
The scenario you describe doesn't exist because the theoretical person holding 51% knows sooner or later he will need a big cash injection do fund the above. That means either taking out a loan or issuing more shares.
Think of the largest, most profitable and successful companies you can come up with and see how they have either borrowed money or sold shares in the last 5 years to fund expansion. If they treat their shareholders like shit, no one will buy their shares, it's that simple.
You can have mom an pop's restaurant surviving for decades while staying at the same spot. That simply is not the case when we're talking about multi million companies. No matter how profitable they are, they will never have enough of their own money to keep themselves ahead of competitors for a long time.

Yeah I can see how them paying and being able to pay dividends makes their stocks clearly valuable. It doesn't make stocks as a whole intrinsically valuable, but their stocks sure. As long as the dividends or financial problems don't drive the stock price down compared to your initial buy-in price.

I wouldn't keep my worth in Fiat on the simple fact that you will loose 3-8% due to inflation.

Speculate some things that will grow in value for some time, buy at least 6 different things for diversity ( gold, stocks, land, crypto, guns, cattle, whatever). Speculate till you think they have become as valuable as there going to get in that time and trade it for the next thing... Oh shit investing

Good points. Company is motivated to keep a part of their stocks and gain extra funds by selling them off later, which motivates them to keep their stock prices high.

Kek, that's what it's about yeah

The problem is that it “is paying off”. Like I said before, we are in a speculation bubble, that’s all the stock market is. To return the the star naming analogy, the global markets are a star naming business; the largest problem being that everyone wants a star named after them so they can sell the star to someone else for a profit later. The problem with the system is that it works, so far at least. But really it’s a giant ponzu scheme that just hasn’t depleted the supply of greater fools.

>delicious ponzu schemes

true

Look up global market capitalization, see how much of the works “wealth” is based solely on derivatives

Wow. Did you just google this shit 10 minutes ago to form this idiotic question? There are very specific laws and rules when taking a company public, and you can't issue "shares" of a company unless you've taken it public. Private companies offer equity to investors.

I never said that stocks and cash have no value, I don't know what you read. I simply saying stocks and cash have no intrinsic value, that it is all based on speculation.

"evaluating all its assets or its estimated earnings" is speculation of it's current and future value.

I have no idea what insurance has to do with this discussion.

>I have no idea what insurance has to do with this

That's because you're in over your head and don't know what you're talking about.

Nah dude, gold is valueble because people like it, simple as that. The fact that it happens to be a great conductor is incidental. Diamonds also happen to be the best heat conductors we know of, but that's not what gives them value, just as my phone's ability to be a great paperweight isn't what makes it valuable.

I know you meant valuable as a utility, but my point is that its utility makes no difference in its value what so ever

Oh good then I can learn, please explain to me how insurance is tied in to the intrinsic or tangible value of the Fiat, stocks, or even buildings and farmers?

The entire economy has been based on speculation since the invention of currency. It's not necessarily a bad thing. It comes down to what it even means for something to have value. No use losing sleep over it. In fact if the concept of value wasn't fundamentally abstract then capitalism couldn't exist and we'd still be trading goats for bread

This is true too, and it hasn't backfired and crumbled down for good so far. I'll still keep spreading part of my wealth to things with tangible value.

Something like an objective intrinsic value does not exist. It's not quantifiable. Value is entirely in the eye of the beholder. Some things can have value to some people and not to others.
And as I said a stocks give you ownership of things that have "intrinsic value" even in your eyes, e.g. land, buildings, goods etc.
>I have no idea what insurance has to do with this discussion.
Even a building can be entirely destroyed over night which is why there is insurance. Just because the risk is low doesn't mean it's non-existent.
So by your logic buying a building would be speculation because you speculate that it will still exist tomorrow or in one year. Otherwise you wouldn't pay hundreds of thousands for it.

> stocks and cash have no intrinsic value

lmao

Having a currency (what I hope crypto will be) is not bad. But to stick with your goats for bread analogy; it’s more like you needed a goat but I’d didn’t need bread at that same point in time, so you gave me a rock as an IOU for bread at a later date. And my grandson took the rock to your grandson and told him that rock was now worth three times the bread you would have previously given me for the goat. And your grandson paid it, because he believed that he could trade the rock back to my great grandson for 4x as many goats. The same initial work resulted in an exponentially greater reward, based on nothing more significant than time. And for some reason this belief has continued to our economy despite the cases where that system causes catastrophic failure.

It's sad that it took this long for someone to stop the cancer that's spreading ITT. Cash is backed by GDP, stocks are backed by a companies assets. Just because posters are too dumb to understand how this works, doesn't mean it's fueled purely by speculation.

Right, no one would spend money on a beach house that they new should be under water due to a receding shore line in a year and no one would insure it. You construct a building because you speculate you will value this building more then the cost of construction. Every venture has risk. Insurance has nothing to do with putting value on a good. That value is still there if it is insured or not.

I still fail to see why insurance is a weather vane for value. In my eyes Insurance is just hedging your speculation for value.

I'm pretty sure the guy is just baiting but I don't have anything better to do, so whatever.

Cash is backed by GDP, lol

1920
>cash is backed by gold
2018
>cash is backed by GDP
2020
>cash is backed! Just believe it!
2050
>what is “cash”?

My point is that everything is speculation if your definition of it is an investment in something that has an uncertain future.
But usually you would only call an investment speculation if it is done without proper analysis.
Thus stocks themselves are not speculation but there can be speculation about their price.
Besides you're kind of moving the goal post. Your initial premise was that a majority owner could do whatever he wants which he can't because of various reasons including legal ones.

The whole point I was trying to make is that you should stop thinking of your assets in terms of "tangible value." Nothing is inherently valuable because value is an abstract concept. Some assets just feel more "real" than others. It's critical to understand this

i disagree with your "nothin is inherently valuable" nonsense.

Not baiting, just blown away at how simultaneously stubborn and uninformed you are. Dunning-Kruger effect in full force today.

What's inherently valuable and how do you quantify it?
I wasn't referring to you.

i would say food is inherently valuable, probably quantify by net weight

The Stockmarket like crypto is a greater fool market.

Most stock does not pay dividends and if it does it does not reflect the income and income growth the company experiences every year, those that do, do it for short periods of time (5years or so) and then vote to remove or reduce dividends as it is only a tool to increase the value of their stock.
And yes most companies keep 51-60% ownership in the hands of a few or just 1.
Crypto doesn’t look so silly now huh.

dividends are for long term investment strategies where predictable returns are preferred over larger returns
nothing wrong with dividends, but they are just one instrument available

What you're asserting is that certain things have the property of being valuable, like rocks have the proporty of being hard.

If I gave you $10 mil in cash and then dropped you in the middle of the Sahara, would that cash still be valuable to you? What about $10 mil worth of gold?

If you were in that situation for a week and some lad walked up and offered you a ride to civilization in his helicopter for $10 mil, you wouldn't even consider hesitating.

Name me one asset that would be valued equally by some cunt trapped in the desert and some cunt browsing biz right now

calories/nutritional value

Nope. Food is only valueble because people don't want to die. Fear of starving to death is what makes food valuable. Fear is speculative by definition

>Name me one asset that would be valued equally by some cunt trapped in the desert and some cunt browsing biz right now
I already did: food.

You are trying to goad me, but things do have intrinsic/inherent value. You don't think a man with $10 mil in cash won't burn it when the desert gets freezing at night? Or won't try to use the gold as a counter-weight to trap some desert hare or other food?
Those might be better values.

fear is speculative by definition. what definition; where?
if you want to reach for outliers instead of staying within bounds, then go ahead, because you already did.

Firstly, no, food will be valued infinitely more by the person with no food than by the person with a stocked fridge. Secondly, your argument for why gold is inherently valuable is because it's heavy? C'mon man. You clearly understand basic supply and demand but are failing to take it to it's logical conclusion. If everything's value is inherently dependent on context, then nothing possesses value outside of context.

A fluid will ALWAYS confirm to the shape of its container, every time, without exception. This is a fundamental property of fluids. For something to have the fundamental proporty of value it would have to always be equally valuable to everything, everywhere at any time

I'm not trying to goad you mate. This is the most basic principle of economics, it IS economics, and you absolutely will get fucked at some point unless you understand it. I'm trying to help you

Shareholders can sure for rights to profit sharing if it’s within your original prospectus.

Stockmarket is a pyramid scheme.

What is fear, fundamentally? When do you feel it? You only ever feel fear when you speculate on the future. You'd be afraid if a tiger walked in your room because you know that, in the future, the very near future, that tiger will likely fuck up your day. If you'd never heard of a tiger before, you wouldn't know that it's probably going to fuck you up and thus would not have any reason to be afraid

you provided the hypothetical. i gave my reasoning.
from what i can tell about your argument is that if something doesn't hold an equal value between two individuals, then that thing holds no value; contrarily, it still held value for each concerned individual, just not of the same quality.

ok Atreides

My argument isn't that nothing has value, it's that nothing has inherent value. Nothing will always be valueble in every situation. Thus, everything's value is derived contextually. That's the extent of my argument.

You could probably go through life believing the paper in your wallet or the gold in your safe has the objective proporty of value and be just fine. But that mentality speaks of a misunderstanding of the fundamentals of economics. If youre okay with that then more power to you, but if you keep involving yourself in the economic world you will absoluty get fucked over eventually by someone who knows what he's doing. Economics is a zero sum game, and it's always the greater fool who loses