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As far as I can tell, the company doesn't get anything as the shares are traded back and forth. Yet they're still beholden to a lot of short term chasing, because that's what shareholders demand.



Right - the IPO is about trading future claims on income. But if the owners do bad things, in theory it hurts the equity price in the future.

The system isn't perfect by any means, but discouraging people from exchanging equity when they have differences of opinion doesn't help.


Well, bad is a relative term, and that's part of the problem. A number of "activist investors" consider it bad if they're not getting huge dividends and growth from every company, pressing short term gains instead of long term sustainability. And what's worse, sometimes these investors buy the stock specifically so they can do that.


It's not investors who pursue short term gains at the expense of long term gains, it's management. CEOS/Boards/Top management practice share price manipulation to maximize the value of their own stock options. If you are CEO of a company and you have a big block of options vesting at years end, it's time to announce a buy back program to get the stock to pop, even if it's determinedly to building the long term value of the business.

If you want shareholders to act more like owners, allow them to be treated like owners. Currently the SEC's anti-raider rules prevent any shareholders from proposing board slates. Boards are picked by boards, insiders pick insiders. That's the real disconnect here.


Every company needs to balance this. If there is no investment now, there is no future.


The key is the amount each company should invest depends on it's situation. Some companies don't do a good job investing in their future, and are better off returning money to shareholders. (Look at companies that "invest" in corporate jets for example) Other companies are better at making good investments, and should invest all their profits and then some.




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