Does investing actually help a company ?

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ps56k
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Does investing actually help a company ?

Post by ps56k »

I came across this question with some dinner friends - and didn't really know how to answer.... or maybe even ask the question.

I've always bought stocks of companies that I wanted to help or be part of their biz and growth.
The question was - when you buy a stock, does it really do anything for the company....
unlike a simple investment to a company with a partial stock ownership to help the company with capital, and allow it to grow.

So - when you buy stock - does it really help the company, as if you were actually loaning them money ?
Of course, on the flip side - you are betting the company will do well, growth, and increase the value of your "share".
Jack FFR1846
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Re: Does investing actually help a company ?

Post by Jack FFR1846 »

In a direct, monetary way, no.

You are not buying anything from the company whose stock you just bought. You bought the stock from Jim Bob, who thinks the stock isn't worth what you're willing to pay.
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bluquark
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Re: Does investing actually help a company ?

Post by bluquark »

No, not when you're buying up a large-cap stock at least. You only help reinforce the general system that allowed the company to raise money in the past. If there were not people like you around to buy the shares when they want to exit, venture capitalists might not have seen it as worthwhile to invest back then, or moving forward for different companies.

So, I don't think there's any reason to buy stock to "help" companies you believe in. For the same reason, I also personally do not think anything is achieved by not buying stock in companies that I think have unethical operations. Even though I have a quite strong distaste for certain industries, I accept the simplicity of pure indexing as opposed to ESG funds, as I can't see any effect avoiding a certain holding would actually have on the real world.
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ThankYouJack
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Re: Does investing actually help a company ?

Post by ThankYouJack »

I may be off, but seems like it helps drive the stock price up and that would help companies and their employees. If not, why would CEO's have so much pressure to keep the stock price up? And for employees of companies that get RSUs obviously having a higher stock price is beneficial.
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Ben Mathew
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Re: Does investing actually help a company ?

Post by Ben Mathew »

It can, in an indirect way. When you buy the shares of a company on the open market, you drive the share price up. The company can capitalize on this increased price by issuing new shares, thereby raising capital at a lower cost. (Issuing a share gets it $40 instead of $39.) If the company does not raise capital by issuing shares, it does not directly benefit from the higher stock price. The existing shareholders can sell their shares at a higher price, so it's nice for them, but the company operations will remain unaffected.
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Re: Does investing actually help a company ?

Post by aristotelian »

I think you have the causality backwards. Owning the stock entitles you to a share of future profits. If the company does well, the company helps you.

The stock price is determined at any given point by the market's expectations of future profits. If you are seeking to help the company, the best thing to do is buy their products and services.
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Re: Does investing actually help a company ?

Post by jyoung »

ThankYouJack wrote: Fri Feb 22, 2019 2:41 pm If not, why would CEO's have so much pressure to keep the stock price up? And for employees of companies that get RSUs obviously having a higher stock price is beneficial.
I think you answered your question... they are pressured because it directly affects their personal compensation. Nothing to do directly with the actual company at all (except if they issue new shares, activist investor involvement since it is "publicly owned," or something like that). So the idea, I believe, is that they will do better for the organization/shareholders if it benefits them personally. I know that is probably way over simplifying how our system works, but that's my understanding.

If I think too much about this sort of thing I end up going down the rabbit hole of "does anything really have value" other than food. Kind of makes me want to sell off everything, buy livestock, and become a prepper! :oops:
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bluquark
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Re: Does investing actually help a company ?

Post by bluquark »

They are also pressured because their prestige, respect and room for maneuver is related to the stock price. A.k.a. "managerial feudalism"
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pward
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Re: Does investing actually help a company ?

Post by pward »

The company are directly helped by the institutional investors that buy their fresh issues of stock when they need to generate capitol. You're however buying it from someone else, so your capitol is helping the person who sold it to you. You also probably don't have enough funds to be able to buy enough shares to support the stock or up the purchase price, which would benefit the company if they decided to issue new shares. So, no you really aren't helping the company at all. You're instead hoping the company will help you.
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Re: Does investing actually help a company ?

Post by rmelvey »

Even though the cash doesn't directly work its way into the companies balance sheet, buying stock on the secondary market does help increase the price of the shares, which can make raising debt/equity in the future easier for the company.
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Re: Does investing actually help a company ?

Post by fortyofforty »

I've thought about this as well. I came to the conclusion that only the initial IPO purchase "helps" the company. Everything else is froth.
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Re: Does investing actually help a company ?

Post by MotoTrojan »

ThankYouJack wrote: Fri Feb 22, 2019 2:41 pm I may be off, but seems like it helps drive the stock price up and that would help companies and their employees. If not, why would CEO's have so much pressure to keep the stock price up? And for employees of companies that get RSUs obviously having a higher stock price is beneficial.
It also allows them to get cheaper financing (sell less of company for same $). It’s vitally important.
fortyofforty
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Re: Does investing actually help a company ?

Post by fortyofforty »

MotoTrojan wrote: Fri Feb 22, 2019 9:01 pm
ThankYouJack wrote: Fri Feb 22, 2019 2:41 pm I may be off, but seems like it helps drive the stock price up and that would help companies and their employees. If not, why would CEO's have so much pressure to keep the stock price up? And for employees of companies that get RSUs obviously having a higher stock price is beneficial.
It also allows them to get cheaper financing (sell less of company for same $). It’s vitally important.
I think the owners demand stock prices be kept up. If the CEO fails to deliver for the owners, he or she will be replaced.
miamivice
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Re: Does investing actually help a company ?

Post by miamivice »

ThankYouJack wrote: Fri Feb 22, 2019 2:41 pm I may be off, but seems like it helps drive the stock price up and that would help companies and their employees. If not, why would CEO's have so much pressure to keep the stock price up?
CEOs work for the board of directors, who in turn are hired by the shareholders. If the CEO wants to keep his job, the board of directors should be pleased with his work. If the board of directors want to keep their job, the owners should be pleased with the work that the BoD is doing.

Higher stock prices do help companies in that they can issue more shares of stock if their company is in demand. Diluting shares pulls the prices down however that is offset by increasing share price because the company is being perceived as more valuable. While a company with sagging stock value can issue more shares, it will further sag the stock price and the company may have a hard time raising funds.
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Re: Does investing actually help a company ?

Post by miamivice »

fortyofforty wrote: Fri Feb 22, 2019 8:56 pm I've thought about this as well. I came to the conclusion that only the initial IPO purchase "helps" the company. Everything else is froth.
Purchases of shares directly from the company (IPO or subsequent releases of shares) help the company directly.
Bacchus01
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Re: Does investing actually help a company ?

Post by Bacchus01 »

miamivice wrote: Sat Feb 23, 2019 7:39 am
ThankYouJack wrote: Fri Feb 22, 2019 2:41 pm I may be off, but seems like it helps drive the stock price up and that would help companies and their employees. If not, why would CEO's have so much pressure to keep the stock price up?
CEOs work for the board of directors, who in turn are hired by the shareholders. If the CEO wants to keep his job, the board of directors should be pleased with his work. If the board of directors want to keep their job, the owners should be pleased with the work that the BoD is doing.

Higher stock prices do help companies in that they can issue more shares of stock if their company is in demand. Diluting shares pulls the prices down however that is offset by increasing share price because the company is being perceived as more valuable. While a company with sagging stock value can issue more shares, it will further sag the stock price and the company may have a hard time raising funds.
Boards are hired by the CEO, they are approved by the shareholders. It is rare, but not impossible, for the shareholders to actually hire a board member. Usually that is done when one of the shareholders becomes a majority holder and swings enough votes to put him/herself on the board.
miamivice
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Re: Does investing actually help a company ?

Post by miamivice »

Bacchus01 wrote: Sat Feb 23, 2019 7:51 am
miamivice wrote: Sat Feb 23, 2019 7:39 am
ThankYouJack wrote: Fri Feb 22, 2019 2:41 pm I may be off, but seems like it helps drive the stock price up and that would help companies and their employees. If not, why would CEO's have so much pressure to keep the stock price up?
CEOs work for the board of directors, who in turn are hired by the shareholders. If the CEO wants to keep his job, the board of directors should be pleased with his work. If the board of directors want to keep their job, the owners should be pleased with the work that the BoD is doing.

Higher stock prices do help companies in that they can issue more shares of stock if their company is in demand. Diluting shares pulls the prices down however that is offset by increasing share price because the company is being perceived as more valuable. While a company with sagging stock value can issue more shares, it will further sag the stock price and the company may have a hard time raising funds.
Boards are hired by the CEO, they are approved by the shareholders. It is rare, but not impossible, for the shareholders to actually hire a board member. Usually that is done when one of the shareholders becomes a majority holder and swings enough votes to put him/herself on the board.
No, the CEO does not hire the board of directors. The CEO reports to the board of directors.

Maybe the term "hired" wasn't the correct term, but the board of directors are accountable to the shareholders. The shareholders can and will fire the board if they don't do their job well. Perhaps the board members resign prior to getting fired to save face, but the shareholders do exert control in this matter.
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Re: Does investing actually help a company ?

Post by yatesd »

Issuing stocks and bonds is how a company raises capital. So directly or indirectly you are helping the company and making a bet they will be more successful or less risky than other options.

I use index funds but this is one reason that I tend to do a little more home bias and I suspect a reason other Countries do the same thing. International investing IMHO is to some extent betting on the other team. Right now I have about 25% of assets in International but it does feel a little like putting 75% of your money on the Ravens (if you live in MD) and putting 25% of your money on the Steelers.

I'll also add that buying goods, services, also have an impact. One reason I like to know a something about the company I am working with...the article about Heinz, Kraft, and Burger King in the Wall Street Journal today is interesting for this same reason.
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Re: Does investing actually help a company ?

Post by acegolfer »

Yes. It lowers WACC.
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Re: Does investing actually help a company ?

Post by CarpeDiem22 »

Retail buying helps drive the stock price up. How that helps: (as per what I've learned from my limited experience at my small cap org)

1. It helps shareholders stay confident about return on their capital. If price stays bad for a couple of years, CEO's job is at high risk.
2. If fresh equity is to be raised, it leads to lesser shareholding dilution for a given dollar amount raised.
3. If company market cap is trading at say 20x EBITDA, the same valuation can be showcased to smaller businesses and that encourages them to be acquired. Basically, company can sell the dream to small cos and acquire them cheaply.
4. It prevents hostile takeover bids.
5. Senior management is motivated as their ESOPs do good.
6. Stock price is a general reflection of company's image, so even employees don't have any ESOPs feel good and motivated with higher stock price.
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Re: Does investing actually help a company ?

Post by Valuethinker »

fortyofforty wrote: Fri Feb 22, 2019 8:56 pm I've thought about this as well. I came to the conclusion that only the initial IPO purchase "helps" the company. Everything else is froth.
Secondary equity offerings. Companies issue more new stock. Either for capital spending or to buy other companies.

A large market cap tends to be associated w higher credit rating and thus cheaper borrowing so that's another benefit.

To the extent that either of these 2 factors pertain it may be an advantage.
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Re: Does investing actually help a company ?

Post by Xrayman69 »

On a micro scale with the likes of retail investors likely no affect on “helping or hurting company “. On a macro scale the collapse of a stock price and market value hurts credit rating and ability to borrow.

As prior post states , if you want to directly help or validate a com0any buy the product or use the service.
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Re: Does investing actually help a company ?

Post by JoMoney »

Yes, buying stock helps set the valuation of the company which is useful for secondary/seasoned offerings and for acquisitions/growth financed with equity rather than debt.
Also, pretty much everything needs to be saved and "owned" by some entity. Taking an ownership equity stake gives savers a way to do that, and spenders a way to liquidate what they own. If everyone consumed everything, and did no saving, there wouldn't be much of anything for durable production infrastructure or any base to "grow" from. Some people might burn the apple tree for firewood when the season ends, but having an "owner" of the tree with an eye on selling more apples next season makes for a more productive long-term (as long as there is a "next season").
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Re: Does investing actually help a company ?

Post by MotoTrojan »

fortyofforty wrote: Sat Feb 23, 2019 6:57 am
MotoTrojan wrote: Fri Feb 22, 2019 9:01 pm
ThankYouJack wrote: Fri Feb 22, 2019 2:41 pm I may be off, but seems like it helps drive the stock price up and that would help companies and their employees. If not, why would CEO's have so much pressure to keep the stock price up? And for employees of companies that get RSUs obviously having a higher stock price is beneficial.
It also allows them to get cheaper financing (sell less of company for same $). It’s vitally important.
I think the owners demand stock prices be kept up. If the CEO fails to deliver for the owners, he or she will be replaced.
I’m referring to the company getting cheaper financing.
fortyofforty
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Re: Does investing actually help a company ?

Post by fortyofforty »

MotoTrojan wrote: Sat Feb 23, 2019 12:25 pm
fortyofforty wrote: Sat Feb 23, 2019 6:57 am
MotoTrojan wrote: Fri Feb 22, 2019 9:01 pm
ThankYouJack wrote: Fri Feb 22, 2019 2:41 pm I may be off, but seems like it helps drive the stock price up and that would help companies and their employees. If not, why would CEO's have so much pressure to keep the stock price up? And for employees of companies that get RSUs obviously having a higher stock price is beneficial.
It also allows them to get cheaper financing (sell less of company for same $). It’s vitally important.
I think the owners demand stock prices be kept up. If the CEO fails to deliver for the owners, he or she will be replaced.
I’m referring to the company getting cheaper financing.
Yes. I was explaining why a CEO feels pressure to keep a stock price high.
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Re: Does investing actually help a company ?

Post by Nate79 »

CEOs and top level management of Fortune 500 companies spend a significant amount of their time meeting with shareholders to maintain and improve faith in the company and the value of the company reflected in the share price. The share price, meaning value of the company has significant impact on the future of the company. Especially in the capability to borrow at low cost.
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Re: Does investing actually help a company ?

Post by MotoTrojan »

fortyofforty wrote: Sat Feb 23, 2019 1:25 pm
MotoTrojan wrote: Sat Feb 23, 2019 12:25 pm
fortyofforty wrote: Sat Feb 23, 2019 6:57 am
MotoTrojan wrote: Fri Feb 22, 2019 9:01 pm
ThankYouJack wrote: Fri Feb 22, 2019 2:41 pm I may be off, but seems like it helps drive the stock price up and that would help companies and their employees. If not, why would CEO's have so much pressure to keep the stock price up? And for employees of companies that get RSUs obviously having a higher stock price is beneficial.
It also allows them to get cheaper financing (sell less of company for same $). It’s vitally important.
I think the owners demand stock prices be kept up. If the CEO fails to deliver for the owners, he or she will be replaced.
I’m referring to the company getting cheaper financing.
Yes. I was explaining why a CEO feels pressure to keep a stock price high.
There are massive compensation drivers too, such as bonuses tied to stock price, often bonuses of stock (leveraged incentive).
bberris
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Re: Does investing actually help a company ?

Post by bberris »

miamivice wrote: Sat Feb 23, 2019 7:55 am
Bacchus01 wrote: Sat Feb 23, 2019 7:51 am
miamivice wrote: Sat Feb 23, 2019 7:39 am
ThankYouJack wrote: Fri Feb 22, 2019 2:41 pm I may be off, but seems like it helps drive the stock price up and that would help companies and their employees. If not, why would CEO's have so much pressure to keep the stock price up?
CEOs work for the board of directors, who in turn are hired by the shareholders. If the CEO wants to keep his job, the board of directors should be pleased with his work. If the board of directors want to keep their job, the owners should be pleased with the work that the BoD is doing.

Higher stock prices do help companies in that they can issue more shares of stock if their company is in demand. Diluting shares pulls the prices down however that is offset by increasing share price because the company is being perceived as more valuable. While a company with sagging stock value can issue more shares, it will further sag the stock price and the company may have a hard time raising funds.
Boards are hired by the CEO, they are approved by the shareholders. It is rare, but not impossible, for the shareholders to actually hire a board member. Usually that is done when one of the shareholders becomes a majority holder and swings enough votes to put him/herself on the board.
No, the CEO does not hire the board of directors. The CEO reports to the board of directors.

Maybe the term "hired" wasn't the correct term, but the board of directors are accountable to the shareholders. The shareholders can and will fire the board if they don't do their job well. Perhaps the board members resign prior to getting fired to save face, but the shareholders do exert control in this matter.
I knew a guy who served on the Board. He told me he was free to vote however he wanted. Once.
aspiringboglehead
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Re: Does investing actually help a company ?

Post by aspiringboglehead »

By buying shares, you are paying to step into the shoes of someone who helped the company (or one of their successors) by making an equity investment in it, and you are also receiving the potential benefit that originally came with that help (a share of the profits and a residual claim to the assets of the company).
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Re: Does investing actually help a company ?

Post by pascalwager »

yatesd wrote: Sat Feb 23, 2019 8:11 am Issuing stocks and bonds is how a company raises capital. So directly or indirectly you are helping the company and making a bet they will be more successful or less risky than other options.

I use index funds but this is one reason that I tend to do a little more home bias and I suspect a reason other Countries do the same thing. International investing IMHO is to some extent betting on the other team. Right now I have about 25% of assets in International but it does feel a little like putting 75% of your money on the Ravens (if you live in MD) and putting 25% of your money on the Steelers.

I'll also add that buying goods, services, also have an impact. One reason I like to know a something about the company I am working with...the article about Heinz, Kraft, and Burger King in the Wall Street Journal today is interesting for this same reason.
If it's disloyal to own foreign stocks, then it's equally disloyal to own US multi-national stocks because US multi-national companies sell products in foreign countries and thereby contribute to the prosperity and well-being of those countries.
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Re: Does investing actually help a company ?

Post by fortyofforty »

pascalwager wrote: Sat Feb 23, 2019 4:04 pm
yatesd wrote: Sat Feb 23, 2019 8:11 am Issuing stocks and bonds is how a company raises capital. So directly or indirectly you are helping the company and making a bet they will be more successful or less risky than other options.

I use index funds but this is one reason that I tend to do a little more home bias and I suspect a reason other Countries do the same thing. International investing IMHO is to some extent betting on the other team. Right now I have about 25% of assets in International but it does feel a little like putting 75% of your money on the Ravens (if you live in MD) and putting 25% of your money on the Steelers.

I'll also add that buying goods, services, also have an impact. One reason I like to know a something about the company I am working with...the article about Heinz, Kraft, and Burger King in the Wall Street Journal today is interesting for this same reason.
If it's disloyal to own foreign stocks, then it's equally disloyal to own US multi-national stocks because US multi-national companies sell products in foreign countries and thereby contribute to the prosperity and well-being of those countries.
Not if those companies employ you, your friends, your neighbors, and your close relatives. Supporting the companies that make up a domestic economy is not a bad thing for your community, no matter in which country you live.
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Re: Does investing actually help a company ?

Post by Valuethinker »

fortyofforty wrote: Sun Feb 24, 2019 7:34 am
pascalwager wrote: Sat Feb 23, 2019 4:04 pm
yatesd wrote: Sat Feb 23, 2019 8:11 am Issuing stocks and bonds is how a company raises capital. So directly or indirectly you are helping the company and making a bet they will be more successful or less risky than other options.

I use index funds but this is one reason that I tend to do a little more home bias and I suspect a reason other Countries do the same thing. International investing IMHO is to some extent betting on the other team. Right now I have about 25% of assets in International but it does feel a little like putting 75% of your money on the Ravens (if you live in MD) and putting 25% of your money on the Steelers.

I'll also add that buying goods, services, also have an impact. One reason I like to know a something about the company I am working with...the article about Heinz, Kraft, and Burger King in the Wall Street Journal today is interesting for this same reason.
If it's disloyal to own foreign stocks, then it's equally disloyal to own US multi-national stocks because US multi-national companies sell products in foreign countries and thereby contribute to the prosperity and well-being of those countries.
Not if those companies employ you, your friends, your neighbors, and your close relatives. Supporting the companies that make up a domestic economy is not a bad thing for your community, no matter in which country you live.
I think one could make a goid case that BMW or Mercedes, or Glaxo k Smithkline have been very good US corporate citizens. Or Honda or Toyota.

I have seen foreign industrial companies continue w efforts to manufacture in USA after US companies have offshored.
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Re: Does investing actually help a company ?

Post by SevenBridgesRoad »

<<does it really help the company>>>

It's always fascinating how often we have long debates and discussions, without first defining terms. What do we mean by "help"?

So with that said, my interpretation is that the company is "helped" existentially by participating in a capitalist economy, which would not exist without individuals willing to invest their capital in companies. It doesn't matter if you are an original investor or not. The system would not exist without the ability to buy and sell. Therefore, without folks like Topic Author and the rest of us, willing to participate in capitalism sell-side and buy-side, there would be no capitalist economy in existence and the company would have never existed. Seems like help to me.
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Re: Does investing actually help a company ?

Post by Dialectical Investor »

ps56k wrote: Fri Feb 22, 2019 2:02 pm
So - when you buy stock - does it really help the company, as if you were actually loaning them money ?
It may be more tangible that you are "helping" a company directly if you participate in a share offering, but as others have pointed out, where the money flows does not matter very much. Consider if you had participated in an IPO. Now you are a shareholder at time t. You sell your shares to someone else at time t + 1. Then you buy shares at time t + 2. You are not "helping" the company any more at time t than you are a time t + 2. You and the company are in the same position at both times. If you are helping anyone more in the first case, it is not the company but rather the underwriter, compared to the second case, where you are helping the stock seller.
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Re: Does investing actually help a company ?

Post by Broken Man 1999 »

yatesd wrote: Sat Feb 23, 2019 8:11 am Issuing stocks and bonds is how a company raises capital. So directly or indirectly you are helping the company and making a bet they will be more successful or less risky than other options.

I use index funds but this is one reason that I tend to do a little more home bias and I suspect a reason other Countries do the same thing. International investing IMHO is to some extent betting on the other team. Right now I have about 25% of assets in International but it does feel a little like putting 75% of your money on the Ravens (if you live in MD) and putting 25% of your money on the Steelers.

Instead of betting on the home team, I think it is better to bet on the best team. Take cars for example. Had the Japanese car invasion not occurred, do you believe Detroit would have woken up one morning and said, "Gee, our cars are pure crap. We need to make them better!" I don't think that would have happened, absent better cars from foreign car maker being available. I remember a time when the first place you took your shiny new car was to a rustproofing shop.

I think rewarding the best company that provides the goods/services you need is the best policy. In business, you adapt or die.


I'll also add that buying goods, services, also have an impact. One reason I like to know a something about the company I am working with...the article about Heinz, Kraft, and Burger King in the Wall Street Journal today is interesting for this same reason.
Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
SevenBridgesRoad
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Re: Does investing actually help a company ?

Post by SevenBridgesRoad »

Dialectical Investor wrote: Sun Feb 24, 2019 2:56 pm
ps56k wrote: Fri Feb 22, 2019 2:02 pm
So - when you buy stock - does it really help the company, as if you were actually loaning them money ?
It may be more tangible that you are "helping" a company directly if you participate in a share offering, but as others have pointed out, where the money flows does not matter very much. Consider if you had participated in an IPO. Now you are a shareholder at time t. You sell your shares to someone else at time t + 1. Then you buy shares at time t + 2. You are not "helping" the company any more at time t than you are a time t + 2. You and the company are in the same position at both times. If you are helping anyone more in the first case, it is not the company but rather the underwriter, compared to the second case, where you are helping the stock seller.
I'm picturing a go-back-in-time-and-change-things movie from this. You've changed capitalism from your time machine...Your Polaroid of McFly Inc begins to fade...
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Re: Does investing actually help a company ?

Post by fortyofforty »

Valuethinker wrote: Sun Feb 24, 2019 2:26 pm
fortyofforty wrote: Sun Feb 24, 2019 7:34 am
pascalwager wrote: Sat Feb 23, 2019 4:04 pm
yatesd wrote: Sat Feb 23, 2019 8:11 am Issuing stocks and bonds is how a company raises capital. So directly or indirectly you are helping the company and making a bet they will be more successful or less risky than other options.

I use index funds but this is one reason that I tend to do a little more home bias and I suspect a reason other Countries do the same thing. International investing IMHO is to some extent betting on the other team. Right now I have about 25% of assets in International but it does feel a little like putting 75% of your money on the Ravens (if you live in MD) and putting 25% of your money on the Steelers.

I'll also add that buying goods, services, also have an impact. One reason I like to know a something about the company I am working with...the article about Heinz, Kraft, and Burger King in the Wall Street Journal today is interesting for this same reason.
If it's disloyal to own foreign stocks, then it's equally disloyal to own US multi-national stocks because US multi-national companies sell products in foreign countries and thereby contribute to the prosperity and well-being of those countries.
Not if those companies employ you, your friends, your neighbors, and your close relatives. Supporting the companies that make up a domestic economy is not a bad thing for your community, no matter in which country you live.
I think one could make a goid case that BMW or Mercedes, or Glaxo k Smithkline have been very good US corporate citizens. Or Honda or Toyota.

I have seen foreign industrial companies continue w efforts to manufacture in USA after US companies have offshored.
As one could make a good case that most foreign corporations do not employ Americans, except to sell their products. Not every foreign-owned company opens factories in the United States, and it's relatively easy to name a few of those that have because they are quite well-known. However, out of many thousand foreign corporations, probably less than a hundred have opened factories in the United States.

I see a lot of bumper stickers imploring me to "Buy Local". Perhaps that applies to stock investing, as well, at least insofar as it tends to "help" American companies. However, I will continue to invest globally, for diversification.
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Phineas J. Whoopee
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Re: Does investing actually help a company ?

Post by Phineas J. Whoopee »

miamivice wrote: Sat Feb 23, 2019 7:39 am ... While a company with sagging stock value can issue more shares, it will further sag the stock price and the company may have a hard time raising funds.
But, doesn't the money the company sold the new shares for go directly onto the asset side of its balance sheet, thereby increasing shareholders equity among more shares? That shouldn't cause share prices to fall.

But, didn't the putative company just finish raising funds by selling new shares? They already raised funds.

When the company gives something away without getting anything in return, like when it issues a dividend, sure its share price will go down. When it exchanges value for value there's no intrinsic reason for it to.

PJW
averagedude
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Re: Does investing actually help a company ?

Post by averagedude »

I think it makes no difference at all over the long term. Revenues and earnings is what will drive the stock price up. In my opionion, if a large institution like Vanguard boycotted a company, over the long term the company's stock price will be the same. If a company is forecasted to have higher revenues and earning over their peers in the same industry, investors will bid the stock price up rather a large buyer has boycotted it or not. Money flows where it is treated best.
Valuethinker
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Re: Does investing actually help a company ?

Post by Valuethinker »

fortyofforty wrote: Sun Feb 24, 2019 9:43 pm
Valuethinker wrote: Sun Feb 24, 2019 2:26 pm
fortyofforty wrote: Sun Feb 24, 2019 7:34 am
pascalwager wrote: Sat Feb 23, 2019 4:04 pm
yatesd wrote: Sat Feb 23, 2019 8:11 am Issuing stocks and bonds is how a company raises capital. So directly or indirectly you are helping the company and making a bet they will be more successful or less risky than other options.

I use index funds but this is one reason that I tend to do a little more home bias and I suspect a reason other Countries do the same thing. International investing IMHO is to some extent betting on the other team. Right now I have about 25% of assets in International but it does feel a little like putting 75% of your money on the Ravens (if you live in MD) and putting 25% of your money on the Steelers.

I'll also add that buying goods, services, also have an impact. One reason I like to know a something about the company I am working with...the article about Heinz, Kraft, and Burger King in the Wall Street Journal today is interesting for this same reason.
If it's disloyal to own foreign stocks, then it's equally disloyal to own US multi-national stocks because US multi-national companies sell products in foreign countries and thereby contribute to the prosperity and well-being of those countries.
Not if those companies employ you, your friends, your neighbors, and your close relatives. Supporting the companies that make up a domestic economy is not a bad thing for your community, no matter in which country you live.
I think one could make a goid case that BMW or Mercedes, or Glaxo k Smithkline have been very good US corporate citizens. Or Honda or Toyota.

I have seen foreign industrial companies continue w efforts to manufacture in USA after US companies have offshored.
As one could make a good case that most foreign corporations do not employ Americans, except to sell their products. Not every foreign-owned company opens factories in the United States, and it's relatively easy to name a few of those that have because they are quite well-known. However, out of many thousand foreign corporations, probably less than a hundred have opened factories in the United States.
You are out by an order of magnitude, at least, but probably 2 orders. And of course opening an office also employs people. The US is the world's largest single market (excepting some measures of Chinese GDP). We don't fault companies for opening in China, why should we fault them for investing in the USA?

In this world of global capitalism, where a company has its home listing is almost irrelevant - talking of the developed markets in this context.

American corporations behave badly in the USA. Foreign companies behave well. American companies behave well. Foreign companies behave badly. You'd find examples in all 4 quadrants out there.
I see a lot of bumper stickers imploring me to "Buy Local". Perhaps that applies to stock investing, as well, at least insofar as it tends to "help" American companies. However, I will continue to invest globally, for diversification.
The problem is local is not local. The salad comes from California, but it may come from Mexico. Out of season fruit comes from South Africa or Chile -- I once saw an actual banana boat being christened in Norway (they have special pressurized chambers to ship the bananas).

The natural gas is fracked in Montana. Or Alberta.

The components? South Korea. Taiwan. Thailand - remember when floods caused the world hard drive industry shortage? Final assembly was in China. But the majority of the value is in the software in the phone and network - and that came from Silicon Valley (with a development lab in Israel, no doubt).

Things don't have nationality any more - global supply chains are too broad and integrated. An "American" car may be made by a Japanese transplant and have more American made parts in it than a "domestic" car -- in fact, if you want a car, increasingly there is no such thing as an American made car as the domestic manufacturers switch to SUVs and light trucks.
Valuethinker
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Re: Does investing actually help a company ?

Post by Valuethinker »

Phineas J. Whoopee wrote: Sun Feb 24, 2019 11:15 pm
miamivice wrote: Sat Feb 23, 2019 7:39 am ... While a company with sagging stock value can issue more shares, it will further sag the stock price and the company may have a hard time raising funds.
But, doesn't the money the company sold the new shares for go directly onto the asset side of its balance sheet, thereby increasing shareholders equity among more shares? That shouldn't cause share prices to fall.

But, didn't the putative company just finish raising funds by selling new shares? They already raised funds.

When the company gives something away without getting anything in return, like when it issues a dividend, sure its share price will go down. When it exchanges value for value there's no intrinsic reason for it to.

PJW
If you issue shares

left hand side of the BS (assets) goes up by cash

right hand side of the BS (liabilities + equity) goes up under the equity section.

In theory the value of the company rises by the amount of cash raised. In practice, investors don't like to have their interests in the company diluted so the company needs to convince them it can use the cash to generate a return greater than other alternative investments the investors own.
fortyofforty
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Re: Does investing actually help a company ?

Post by fortyofforty »

Valuethinker wrote: Mon Feb 25, 2019 3:19 am
fortyofforty wrote: Sun Feb 24, 2019 9:43 pm
Valuethinker wrote: Sun Feb 24, 2019 2:26 pm
fortyofforty wrote: Sun Feb 24, 2019 7:34 am
pascalwager wrote: Sat Feb 23, 2019 4:04 pm

If it's disloyal to own foreign stocks, then it's equally disloyal to own US multi-national stocks because US multi-national companies sell products in foreign countries and thereby contribute to the prosperity and well-being of those countries.
Not if those companies employ you, your friends, your neighbors, and your close relatives. Supporting the companies that make up a domestic economy is not a bad thing for your community, no matter in which country you live.
I think one could make a goid case that BMW or Mercedes, or Glaxo k Smithkline have been very good US corporate citizens. Or Honda or Toyota.

I have seen foreign industrial companies continue w efforts to manufacture in USA after US companies have offshored.
As one could make a good case that most foreign corporations do not employ Americans, except to sell their products. Not every foreign-owned company opens factories in the United States, and it's relatively easy to name a few of those that have because they are quite well-known. However, out of many thousand foreign corporations, probably less than a hundred have opened factories in the United States.
You are out by an order of magnitude, at least, but probably 2 orders. And of course opening an office also employs people. The US is the world's largest single market (excepting some measures of Chinese GDP). We don't fault companies for opening in China, why should we fault them for investing in the USA?

In this world of global capitalism, where a company has its home listing is almost irrelevant - talking of the developed markets in this context.

American corporations behave badly in the USA. Foreign companies behave well. American companies behave well. Foreign companies behave badly. You'd find examples in all 4 quadrants out there.
Opening an office does employ people but the example cited was manufacturing in the United States, not opening an office. How many foreign corporations do you suppose have manufacturing facilities in the United States?
Valuethinker wrote: Mon Feb 25, 2019 3:19 am
fortyofforty wrote: Sun Feb 24, 2019 9:43 pmI see a lot of bumper stickers imploring me to "Buy Local". Perhaps that applies to stock investing, as well, at least insofar as it tends to "help" American companies. However, I will continue to invest globally, for diversification.
The problem is local is not local. The salad comes from California, but it may come from Mexico. Out of season fruit comes from South Africa or Chile -- I once saw an actual banana boat being christened in Norway (they have special pressurized chambers to ship the bananas).

The natural gas is fracked in Montana. Or Alberta.

The components? South Korea. Taiwan. Thailand - remember when floods caused the world hard drive industry shortage? Final assembly was in China. But the majority of the value is in the software in the phone and network - and that came from Silicon Valley (with a development lab in Israel, no doubt).

Things don't have nationality any more - global supply chains are too broad and integrated. An "American" car may be made by a Japanese transplant and have more American made parts in it than a "domestic" car -- in fact, if you want a car, increasingly there is no such thing as an American made car as the domestic manufacturers switch to SUVs and light trucks.
I'll remember that the next time I see something that's marked "Made in USA" or "Product of Mexico". And I'll remind people with those bumper stickers that they are way off base encouraging others to "buy local". In fact, they just don't understand "global supply chains", apparently. :D

"American" cars have contained components made in Canada and the United States for many decades, so there is nothing new there. But each time I've purchased a new car I saw on the window sticker how much of the car was manufactured in the United States, and how much was made in other countries.

Perhaps it is indeed foolish to try to purchase products that are actually made in your home country, even if they have foreign-sounding names or tags. It's the same idea that says boycotts, divestments, and sanctions don't work, since they don't hit the right targets and everything is globally integrated.
MarkBarb
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Re: Does investing actually help a company ?

Post by MarkBarb »

Of course it helps a company if you buy it's stock. If people quit buying it's stock, it's equity would drop making it more expensive for it to raise capital.
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bottlecap
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Re: Does investing actually help a company ?

Post by bottlecap »

Numerous people have stated that buying a stock helps drive the stock price up.

That is not necessarily so.

You can buy a stock as it goes all the way to zero. Volume does not equal stock price increase.

Buying a stock on the secondary market really doesn’t help or hurt a company.

JT
alex_686
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Re: Does investing actually help a company ?

Post by alex_686 »

Phineas J. Whoopee wrote: Sun Feb 24, 2019 11:15 pm
miamivice wrote: Sat Feb 23, 2019 7:39 am ... While a company with sagging stock value can issue more shares, it will further sag the stock price and the company may have a hard time raising funds.
But, doesn't the money the company sold the new shares for go directly onto the asset side of its balance sheet, thereby increasing shareholders equity among more shares? That shouldn't cause share prices to fall.

But, didn't the putative company just finish raising funds by selling new shares? They already raised funds.

When the company gives something away without getting anything in return, like when it issues a dividend, sure its share price will go down. When it exchanges value for value there's no intrinsic reason for it to.

PJW
In theory yes. However, as a general rule if a sagging company has to raise new capital the market takes this as a negative sign. I can think of exceptions. REITs, issuing new shares to mangment. Maybe new shares for a new partner.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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yatesd
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Re: Does investing actually help a company ?

Post by yatesd »

pascalwager wrote: Sat Feb 23, 2019 4:04 pm
yatesd wrote: Sat Feb 23, 2019 8:11 am Issuing stocks and bonds is how a company raises capital. So directly or indirectly you are helping the company and making a bet they will be more successful or less risky than other options.

I use index funds but this is one reason that I tend to do a little more home bias and I suspect a reason other Countries do the same thing. International investing IMHO is to some extent betting on the other team. Right now I have about 25% of assets in International but it does feel a little like putting 75% of your money on the Ravens (if you live in MD) and putting 25% of your money on the Steelers.

I'll also add that buying goods, services, also have an impact. One reason I like to know a something about the company I am working with...the article about Heinz, Kraft, and Burger King in the Wall Street Journal today is interesting for this same reason.
If it's disloyal to own foreign stocks, then it's equally disloyal to own US multi-national stocks because US multi-national companies sell products in foreign countries and thereby contribute to the prosperity and well-being of those countries.
:confused

I think this is where people confuse a global economy vs. global interests. It doesn't matter where they sell and matters only to some extent where it is made, but where it is owned is a big deal.

Which Company helps America the most?

- Amazon vs. Alibaba? Both brands buy significant product from China
- Apple vs. Huawei?
- Ford vs. Volvo?
-Walmart vs. Carrefour?

Some companies will choose to strategically build factories close to where products are sold (Honda), for goodwill, exchange rates, supply chain, etc. They will choose different locations based on market conditions. If the US started to decline Honda would close US factories and move them all to China, India, etc. However, they did not move their HQ to the US and become a US owned company when Japan's market struggled in the 90's. Michelin is a French owned company, etc.

I am fully aware that foreign entities can provide great jobs and do help a local economy. I've worked for 1 Dutch company and 3 Japanese owned firms, one of which is now owned by the Chinese (btw, Japan didn't take the transfer of ownership lightly).
aristotelian
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Re: Does investing actually help a company ?

Post by aristotelian »

MarkBarb wrote: Mon Feb 25, 2019 7:52 am Of course it helps a company if you buy it's stock. If people quit buying it's stock, it's equity would drop making it more expensive for it to raise capital.
Buying a stock now has no effect on the stock's price a month or a year or ten years from now. The stock price is determined by the market at any given moment based on available information. When PGE filed for bankruptcy, nobody cared how many millions of people owned the stock or thought it was a good investment when they bought it.
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