Yesterday, I came across the following comment on Hacker News:
The whole stock market in 2023 makes no sense to me, not just Bed Bath and Beyond. So many companies no longer pay dividends. So many classes of stock are now non-voting shares. Common stock shareholders usually get nothing if a company goes bankrupt and liquidates.
So if I don’t get dividends, can’t vote, and am not entitled to a share of the company’s assets, what is the actual value in owning stock? Do I just wait for the share price to go up, sell at the peak, and pass my shares on to the greater fool? That’s starting to smell a lot like the worst sort of crypto trading.
I feel there is some sense in this comment. Not all shares are alike. So, my question is, do ETF managers such as Vanguard pay attention to this? It’s hard to audit the several thousand share types that make up the typical all-world ETF. Are they all good?
I mean that the typical all-world ETS comprises stocks of thousands of different companies. But as we know, companies have more than one share type: some come with voting rights, and some come with lesser privileges. In some cases, if you own stock with no voting rights, and the company doesn’t pay dividends, it’s not clear what you really own. So the class of shares is something really important to consider when buying stocks. So my basic question is: does Vanguard to a good job of verifying what they buy for common ETFs?
No. Every share represents a certain part of company’s assets and makes you entitled to a certain part of its profits. Dividends is only one way of using company’s profit.
Yes, but this applies to all share classes.
From what I understood, all share classes are indexed separately, so in this case their weighting in the portfolio will be also according to their market capitalization. If they pass liquidity screens, like it is the case for some Swiss companies, which voting shares are hardly traded at all.
Also even if you e.g. can’t vote, most countries (esp. US) have fairly strong regulation for public company. The board can’t disadvantage shareholders, even if they don’t have voting rights.
Another aspect to note is that many companies buy back shares, which also returns money to stock holders, and can be considered a more tax efficient alternative to dividends.
I don’t get in most of the cases why people stress about the voting rights, in structures where a vote does not matter at all. I am talking about companies not countries, democracies.
Let’s take the example of Volkswagen. The voting rights shares costs way more than the VOW3 without the voting rights. But only a small parts of shares are floating on the market, the major part is owned by the Porsche family AG. So in such cases you can’t do anything with your voting rights.
I think these anomalies on the market at due to us, retail people, which do not understand this and eat the demagogue stories from different reddit sources.
Any share is a part of the company. Dividend might be one good option to share the profit. But they can also use that money to grow that company.
To mention bath and beyond and other meme stocks into investment discussions, for me is not correct. There you gamble, and you hope there is a fool later. But no fundamental analysis would support to buy some of the stocks, cryptos, etc. But luckily there are other shares, cryptos, bonds, etc
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