Will the Glazers sell?

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swampash
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Thanks Fuß. You're right of course. Dividend payments don't usually reduce the company value, unless you were doing something really stupid like stripping out the working capital. I think the confusion often arises because people don't understand the relationship between the P&L account and the balance sheet.
fat maradona
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jason_uk wrote: 2 years ago Absolute disgrace. How can they justify that?

Its one thing taking your dividends when the club is earning millions, but when its making a loss, and you keep dipping your hand in.

Fuck them, greedy yank bastards.
tbf, they are paying out dividends from historic profit reserves. It's illegal to pay dividends out of negative reserves (which are created when a company only makes losses) and so the dividends will be out of the profits that were made in previous years and not paid out at the time.

It doesn't seem fair that they do take a dividend when that cash is better spent reinvested into the club. And tbf, they've reinvested a LOT of cash but just not as wisely as the Scousers or Citeh. I'm not justifying what those leaches are doing, all I'm saying is that it's 'business as usual' in the corporate world.
fat maradona
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swampash wrote: 2 years ago Thanks Fuß. You're right of course. Dividend payments don't usually reduce the company value, unless you were doing something really stupid like stripping out the working capital. I think the confusion often arises because people don't understand the relationship between the P&L account and the balance sheet.
Actually on this point, a dividend payout would reduce the company valuation because it'll be both a reduction in the bank balance (net asset) and the profit reserves (accumulated profits). But it'd be insignificant I imagine. The majority of business valuations are based on a multiple of revenue PLUS the net asset value of the company (being the balance sheet, all assets less all liabilities). Manchester United is a monster of a business and I imagine the valuation multiple would be something ridiculous like 25 x revenues + the net asset position (players contracts, stadium etc). When you imagine what that number might be, £11m dividend is fuck all.
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FuB
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fat maradona wrote: 2 years ago
swampash wrote: 2 years ago Thanks Fuß. You're right of course. Dividend payments don't usually reduce the company value, unless you were doing something really stupid like stripping out the working capital. I think the confusion often arises because people don't understand the relationship between the P&L account and the balance sheet.
Actually on this point, a dividend payout would reduce the company valuation because it'll be both a reduction in the bank balance (net asset) and the profit reserves (accumulated profits). But it'd be insignificant I imagine. The majority of business valuations are based on a multiple of revenue PLUS the net asset value of the company (being the balance sheet, all assets less all liabilities). Manchester United is a monster of a business and I imagine the valuation multiple would be something ridiculous like 25 x revenues + the net asset position (players contracts, stadium etc). When you imagine what that number might be, £11m dividend is fuck all.
That's a fair point, fatty, but I think the key point is that a dividend payout doesn't normally affect the share value and so, from dozer's admittedly simplified model, it doesn't affect the value of the company. There's also quite a difference between a publicly traded company and a private limited company. I'm assuming your own company isn't publicly traded so I expect the only monetary value that's ever been attached to your share in that company is the nominal fee you paid in to incorporate the business and the only true value that share has now is in terms of how much of a dividend it entitles you to, i.e. what proportion of the company you own.
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swampash
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This is starting to turn into quite an interesting thread.
If I was to value a private company I'd look for a publicly traded benchmark company [or a sector average] and apply that company's [or sector's] P/E ratio to the private company's profits and then add in the retained profits, which belong to the shareholders and would be paid out pound-for-pound in an acquisition.
A buyer would argue that, because a private company's shares are not freely traded, a discount should be applied to the resulting value.
To counter this a seller should argue that an owner-manager is surrendering their independence, which should attract a premium. Similarly, if a sale goes through then any discount would create an instant gain to the acquiring company's valuation - if the acquirer trades at a multiple of say ten but the seller accepts a multiple of 8 then the buyer has made in immediate gain on the transaction [at 2x the acquired company's incorporated profit]. I think I would argue that's an unfair reflection of the seller's true value to the buyer.
A further argument would be the strategic fit with the buyer's company and is the reason why a seller should always wait for the right strategic deal. Indeed the first question a seller should ask of a prospective buyer is probably along the lines of 'what's the strategic reason for you wanting to buy my company?' That will tell you a lot. The stronger the buyer's strategic fit motive, the better a seller is able to ratchet up a premium on the selling price.

In the case of someone just buying shares in a public company, it just comes down to a classic willing buyer/willing seller judgement. You would normally just look at the share's historic performance and then make a judgement on whether the current share price looks like a fair price. If it's a speculative punt you would look mainly at the historic share price and try to project where it is heading [the 200 day moving average is the common tool here]. If you're looking for safety, you'd probably also look at the historic dividend performance and any forward forecast of earnings per share.
Last edited by swampash 2 years ago, edited 1 time in total.
fat maradona
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Well no FuB, you’re looking at it as a simple asset. It’s not. The shares represent everything the company has done, is doing and a forecast of what it will do in the future. My company isn’t listed unfortunately but it is still valued using the same mechanics, only that the multiples are heavily discounted. My company will still be valued by reference to a multiple of revenue/ebitda and it’s net assets.

Also, a share that rarely has a dividend paid out on it will be worth less than a share that has a regular dividend paid out on it. If the United shares have a dividend paid out on them, they will be valued higher because more investors will want to buy them because they return on investment. A company that doesn’t pay dividends is usually one that doesn’t make any profits to be able to pay out as a dividend.
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swampash
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Hi maradona - our posts seem to have crossed while I was doing a correction - please see above.
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dozer
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fat maradona wrote: 2 years ago Well no FuB, you’re looking at it as a simple asset. It’s not. The shares represent everything the company has done, is doing and a forecast of what it will do in the future. My company isn’t listed unfortunately but it is still valued using the same mechanics, only that the multiples are heavily discounted. My company will still be valued by reference to a multiple of revenue/ebitda and it’s net assets.

Also, a share that rarely has a dividend paid out on it will be worth less than a share that has a regular dividend paid out on it. If the United shares have a dividend paid out on them, they will be valued higher because more investors will want to buy them because they return on investment. A company that doesn’t pay dividends is usually one that doesn’t make any profits to be able to pay out as a dividend.
Investors would want to buy a company that improves in value over time. This means making profits. A company that doesn't make profits certainly shouldn't be paying dividends. A share that rarely pays dividend but also consistently makes profits should be more valuable than an equivalent share that doesn't simply because the market value won't drop.

It's simplistic maybe, but only for the folks who gamble and try to read more into a company than what there is.
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dozer
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FuB wrote: 2 years ago
dozer wrote: 2 years ago
swampash wrote: 2 years ago The company value is a function of the profit stream, dozer, not the dividends, which are just the shareholders share of the profits.
The market cap is the current total valuation of the company according to the free market though. Granted, companies may not be fairly valued by the market but that's what it is.

I own 100 shares of a company worth $10. That makes my asset worth $1000.
Company gives 1$ worth of dividend per share. That's 100$

Assuming the market is stagnant on ex dividend date (for simplicity) the dividend will reduce the market cap of the company by $1 per share.
So my company asset will be worth 1000 - 100 = 900$, and my bank balance will be richer by $1000.
Either way my networth remains the same.
But I'll need to pay taxes on the dividend. It doesn't seem tax efficient.

Idk if dividend tax is lower than capital gains tax in the US or now that I think about it, the glazers don't want to lose control of majority share holding by selling 100$ worth of shares and would prefer to get the income via dividends.
But either way the Glazer's networth remains the same.

...
I think your main misconception comes from assuming that a dividend payout somehow involves paying out some of the actual value of the company. This isn't the case at all so, in your hypothetical analogy, your asset is still worth 1000 after the dividend payout and remains unaffected by that.
Nope. Its your misconception that a dividend payout (indirectly) doesn't involve paying out equivalent value of the company.
The value of the company isn't decided by just the owners. Its decided by the market.
The value of the company doesn't magically stay the same on ex dividend date. It will drop because nothing has changed fundamentally on T-1 day and T which is the date of the dividend eligibility.

It's true that some shareholders prefer dividend stocks but apart from certain tax benefits (if applicable), they are mostly misguided into thinking they're getting free money overnight.
Fuck the Glazers
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