Taking Stock of Stocks

Okay, I'm sure you've all heard of Google's impending IPO and all the excitement it's generated. A well-known and well-respected company is about to let the public invest in them, in order to return even bigger profits.

Because that's what it's all about, isn't it? But I have my own personal take on stocks, shares and what they mean. Not all that many seem to agree immediately with me, but what the hey - it's a timely subject for me to yabber on.

Most people see stocks as companies giving the public an opportunity to make profit from an investment. Why do you invest in company X? Because it will make money. Because I can get a good return. Because dividends will be generous.

I don't quite see it that way. I think that companies going public actually gives people the chance to be part of something. It's an investment not in potential profits but of what they produce.

This is why I wouldn't buy stocks in companies that do things I don't like. Even if it meant missing out on a profit at the end of the day.

I mean, would you want to give money to a company that polluted your local environment? Even if you had a 30% profit in a month?

This is why I would not buy stock in, for example, Microsoft. I don't want them taking my money and using it researching some sort of draconian Digital Rights Management system or to help them usurp open XML standards. I don't want either of these things to happen, I am not going to contribute to the problem.

When people hear me say this, the first response (apart from "you really going to turn down free money?") is usually "but you are only a drop of water when you invest in them - you won't make a difference". Well, yes. Most of us are little drops. But the whole point of things like democracies is the belief that the cumulation of little things eventually amounts to a lot. And how can I expect others to follow if I don't take the step myself?

And the flip side of things is that I feel quite a bit of pride when I am involved in something good, even if it's in the most minute sense. I'm not sure I would invest in something good that looked like a loss-maker - I'd put that under the heading of 'charity'.

Would I invest in Google? Probably. It's not very clear what their plans for the future are, and some are worried that they could turn into some sort of Microsoft clone in terms of clout and influence, but that was said of Yahoo at one time, and anyway, Serge and Larry seem to have good heads on their shoulders.

In a bit of a twist, the other interesting thing about the Google IPO is that some analysts are unsure about how much money there is to be made from the whole IPO shebang. Firstly, they make it clear that they do not expect to see significantly higher profits in the near future, and so dividends are likely to be modest, if not miniscule. Secondly, the system of auctioning their shares leads some to believe that the final price will be very close to the offer price, resulting in lower profits - certainly not in the range of hundreds of percents, which was the rage during the dot-com boom.

The only ones that stand to make real money are those who invested in them when they were still a dream. In short, when people looked at their product and said, "hey, I'd like to be part of that".
posted on Monday, May 17, 2004 - permalink
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