No growth is bad for the investors/stakeholders who make money from that growth, so the issue is probably more pronounced in public companies, but definitely not limited to them.
The whole point of investing is to get a return on the money invested. The reason you choose to put money into one investment over another is you expect to have a higher rate of return than the alternatives.
If a company comes out and says, “We don’t plan to grow and, by the way, you shouldn’t expect a return on your investment” then people will pull their money out and invest elsewhere. As soon as that happens the company goes belly up because they’re all leveraged against their stock.
These companies can still provide a return on investment without growth (just maintaining profit margins will do that) but nothing happens in a vacuum. If there’s an alternative investment that is growing and producing more return, people will put their money there instead.
These companies can still provide a return on investment without growth (just maintaining profit margins will do that) but nothing happens in a vacuum. If there’s an alternative investment that is growing and producing more return, people will put their money there instead.
I sincerely doubt that this is the only way to go about it though. I am sure a lot of investors like sustainability, reliable and regular income more than exponential short-term growth. What’s baffling to me is that business types whine about their line not going up but never understand it’s because of their short-sighted decision.
No growth is bad for the investors/stakeholders who make money from that growth, so the issue is probably more pronounced in public companies, but definitely not limited to them.
The whole point of investing is to get a return on the money invested. The reason you choose to put money into one investment over another is you expect to have a higher rate of return than the alternatives.
If a company comes out and says, “We don’t plan to grow and, by the way, you shouldn’t expect a return on your investment” then people will pull their money out and invest elsewhere. As soon as that happens the company goes belly up because they’re all leveraged against their stock.
These companies can still provide a return on investment without growth (just maintaining profit margins will do that) but nothing happens in a vacuum. If there’s an alternative investment that is growing and producing more return, people will put their money there instead.
I sincerely doubt that this is the only way to go about it though. I am sure a lot of investors like sustainability, reliable and regular income more than exponential short-term growth. What’s baffling to me is that business types whine about their line not going up but never understand it’s because of their short-sighted decision.