Hello guys, this is a post I wrote 220 days ago but couldn’t publish due to a lack of Reddit karma. Funny to see how my examples aged, but my core question is still valid so I post again.
I know this kind of a question has been recently often asked on this sub, but the more I read and the more I get confused.
The main counter argument that I’ve read is that as a shareholder you actually own a part of the company, which includes its assets but also its cash. That’s true yes, but what can you do from it in reality ? Nothing. We cannot request to trade our stock directly with the company for the asset/cash equivalent.
The only options to get money from your stock are :
– company is bought by another one
– dividend is distributed
– you sell higher than you bought.
If none of the two first options happens, then it seems to be like speculation. You sell higher to someone that expects to also sell higher.
Also let’s not forget that companies keep a big part of stocks on their side so they can still control what happens in the company (e.g. dividend distribution).
Let’s take an example : SNAP.
The stock selling price has decreased by 90% over a year.
There was a time the company was actually profitable with a bright future. It made sense to invest at that time and to expect at some point a return on the investment.
Now the stock price has dropped and what can you do from it ? Maybe the company is going to oblivion, not able to generate free cash flow anymore until eventually get delisted. And then what ? The only thing I can see is « you should not have invested in this company ».
Ok but what about Google, Amazon etc. Do you say the same ? What if Amazon has the same outcome in few years ? If it starts to fall what can you do ?
Note: I have never owned SNAP stocks.
Leave a Reply