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by amelius 1071 days ago
> Because companies want to return profits to shareholders.

But the profits are already accounted for through the stock value.

1 comments

No, the stock value accounts for the market's expectation of the aggregate value of returns by dividend, dissolution, buyback, or sale of the whole corporation with an infinite time horizon.

This is, in part, a product of the actual pattern of returns combined with the expectation of change: even if you are profitable, if the market thinks you won’t return any profits until the corporation eventually succumbs to gambler's ruin and dissolves with no residual value, your stock price will be in the toilet.