Q: Can someone tell me why Google (Alphabet) or Facebook shares are worth anything, apart from the reason that you can find an even greater fool to buy them?
I mean, look at your rights:
- These companies never paid a dividend, and are unlikely to do so in the foreseeable future.
- Founders control 50+% of the voting power, therefore the influence of your voting right is essentially zero. In case of GOOG and FB C-class shares, it is by definition zero.
- They are very unlikely be taken over because a) the founders control the majority of voting rights, and b) they are so valuable that there are very few entities that could potentially buy it. If they will be of a more reasonable value to be acquired in the future (see yahoo), you will have already lost most of your money on the investment anyway.
- In case of a bankruptcy you will be compensated… most meagerly, because a) shareholders get their money last, and b) most of the company value is based on its growth, therefore the actual asset value will be far far below the share price.
TL;DR: these companies are very valuable all right, but I could just as well sell you a part of the sun, if you can do nothing at all with your ownership rights.
My suspicion: Google shares are actually a form of currency issued by a public company. But instead of gold it is backed by the value of Google. Since both founders and employees own it, it is unlikely that they will drive its value to the ground anytime soon. Might be stabler than many a fiat currency backed by only a hope of trust.
Humble suggestion: we should create a ‘Google coin’ worth 1/1000th of a share (~80 cents as of Jan 2017), which could be used in small island nations or over the Internet. Call it Froogle for the pennypinchers’ sake 🙂
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