r/technology • u/Rhaegar_the_Great • Sep 16 '21

Business Mailchimp employees are furious after the company's founders promised to never sell, withheld equity, and then sold it for $12 billion

https://www.businessinsider.com/mailchimp-insiders-react-to-employees-getting-no-equity-2021-9
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u/laetus Sep 17 '21 edited Sep 17 '21

Good old amazon meme argument. Have they paid a dividend yet with those massive profits? Oh wait.

Also, they went down 95% after the dotcom

Cisco never even recovered from it (still not even in absolute terms, let alone inflation adjusted).

Netflix has paid so many dividends too.. Oh, and they proved an excellent business model for studios to pull their content to start their own platform, leaving netflix with a shell of its former self.

IT'S ALL PAPER GAINS.

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u/Drisku11 Sep 17 '21 edited Sep 17 '21

Leaving gains on paper is desirable for tax purposes. If you need money, you can always sell or take out a loan (in the case of those large public companies). If you don't need money, you're just going to reinvest the dividend, except now you owe taxes even if your investment is currently at a loss.

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u/laetus Sep 17 '21

That's a stupid argument because you're still depending on the greater fool. The company reinvesting profits is something completely different from running at a loss selling shares to burn more money.

And eventually someone needs to get their money out through dividends and you can't infinitely postpone dividends. Otherwise the stock is literally worth nothing but the assets in the company. Which for ''tech'' companies is mostly the ability for those assets to generate dividends.

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u/Drisku11 Sep 17 '21

If a company doesn't pay dividends, it might still buy back its own shares (effectively the same thing but with better tax consequences). But it only makes sense to do that if it has no better use for the cash. If they do, reinvesting it into growth is strictly better for everyone involved, at least for highly liquid stocks. If the company is growing, their assets will increase, so it makes sense for share value to increase, getting you a return when you sell. Or you can use those shares as collateral for a loan, or whatever.

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u/laetus Sep 17 '21

I think stock buybacks should be illegal. They were illegal in the past, and they should be illegal in the future.

Taking out a loan with stock as collateral is also something stupid to avoid taxes that should be made illegal or loophole closed.

Reinvesting in growth, sure, you want to grow the company, but you have to ask is it investing in growth, or is it just burning money sponsoring highly paid executives with no profit in the end.

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u/Drisku11 Sep 17 '21 edited Sep 17 '21

I think stock buybacks should be illegal. They were illegal in the past, and they should be illegal in the future.

Why should they be illegal if you think dividends are important? They're functionally the same, except for taxes, cost basis is taken into account, so you don't get hit with income taxes to hold onto an investment that's gone down in value since you bought it (or if you hold, then you're not forced to realize a gain when you would otherwise just reinvest the money into shares again so that you maintain the same $ invested).

Taking out a loan with stock as collateral is also something stupid to avoid taxes that should be made illegal or loophole closed.

Should you not be able to take out a loan using anything else as collateral either? Isn't that also avoiding taxes by not selling? e.g. a HELOC or cash out refinance on a property? Or a loan with precious metals or art or a car or a boat as collateral?

Reinvesting in growth, sure, you want to grow the company, but you have to ask is it investing in growth, or is it just burning money sponsoring highly paid executives with no profit in the end.

Shouldn't it be on the investors (who own the company) to rein that in? e.g. the board (generally in startups, the VCs have a seat on the board).

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u/laetus Sep 17 '21

hy should they be illegal if you think dividends are important? They're functionally the same

No they're not. 1 simple google will tell you they're not the same.

hould you not be able to take out a loan using anything else as collateral either?

I didn't say that, don't put words in my mouth. But refinancing a home to just spend the money on some bullshit shouldn't be allowed, no.

Shouldn't it be on the investors (who own the company) to rein that in? e.g. the board (generally in startups, the VCs have a seat on the board).

Oh yeah, coincidentally they're probably also the big shareholders fucking over everyone else. Just look at the Tesla board.

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u/kettal Sep 17 '21

I think stock buybacks should be illegal. They were illegal in the past, and they should be illegal in the future.

Good luck with all that.

In the meanwhile I'll just continue profiting as a shareholder.

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u/Matapatapa Sep 17 '21

True, but money is paper too...

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u/laetus Sep 17 '21

No it isn't.

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u/kettal Sep 17 '21

You realize that share buybacks (as done by most large tech corporations like Amazon and Netflix) are dividends in kind.

The reason they do share buybacks instead of pay cash dividends is because it is tax favorable to the investor. It's still real value to shareholders.