Yeti-420-69

Yeti-420-69 t1_j2d4zyj wrote

You have a lemonade stand. Between your 100lbs of lemons, 18 kilos of sugar, some ice cube trays, a table, and the earning potential it has over the next few months, you figure you could sell the business for $1000. This is your 'market cap'.

You want some cash right now to buy a new sign to go over your table and some other things so you decide to 'take your business public' and let 3 of your friends buy in. You split the company into 4 equal 'shares' and value them at $250 each.

Over the summer you all take turns working the stand, you reinvest the profits and open a second stand. Everything is going great until fuckin' Steve decides he's done working, wants to divest of his part of the company and relax until school starts up again.

The company is bigger now, has more inventory, more growth potential, more revenue, cash on hand from recent sales, you all decide to value it at $4000. Now if someone had $1000 they could purchase his share for themselves, but nobody has taken any profits, so instead the company buys back his share with that cash on hand. So by spending $1000 the company is now worth $3000 and is split 3 ways as that share was destroyed. Your shares are still worth $1000 each but now you own a larger piece of the company. This will mean a larger cut of future profits in the form of dividends and greater growth potential in the price of the stock, as future valuations will divide the market cap by 3 instead of 4.

I'm stoned and that seemed like a good way to explain it lol I hope it makes sense.

Edit: and I'm not American but isn't a 401k just a type of retirement account? They're just going to hold index and mutual funds.. those don't 'lag' the market, they're just collections of different equities and bonds.

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Yeti-420-69 t1_j298gf0 wrote

It is literally illegal for them to not do what's going to provide the best return to shareholders. Shareholders would need to take issue with whatever action was taken and take the board to court, but nobody is doing a stock buyback to personally enrich themselves.

You've mangled so many terms here I don't know where to start... Do you think there's a difference between owners and shareholders? Cashing out means selling shares, doing a buyback relies on the market to uphold the current valuation and increase the share price to keep the market cap level. If the market thinks insiders are only doing the buyback to 'cash out' and that it's not in the best interest of the corporation, that won't happen.

I'll let you get back to childish insults now.

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Yeti-420-69 t1_j28fivn wrote

Stock manipulation?!?!?!? It's giving directly back to shareholders... It's a strong statement that leadership believes their stock is undervalued and that the best investment they can make is in their own company. Stock manipulation lmao

Edit: and to answer your question... Of course it's negative in this context, the money is spent.

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Yeti-420-69 t1_izsqzxz wrote

High wages for the top 1% of earners... Your minimum wage is a fucking joke

Good health care for those that can afford it... The rest die with medical debt, hence the chart above.

All your food is garbage. When I travel there I find it almost impossible to eat well without just going to the grocery store and living on fresh produce. It's disgusting.

The things you listed are only available to the well off.

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