If Amazon and similar corporates haven’t turned profitable, then how are they paying their shareholders/investors?
In: Economics
First, shareholders/investors are more interested in share values than profitability or dividends.
For example, let’s say I’ve bought an Amazon share at $200, and now it costs $1000. That is $800 I’ve made on this investment. The dividends, on the other hand, would probably be around $5 a year in THE BEST case scenario – in other words, quite negligible compared to how much I’ve made on the investment. And Amazon actually doesn’t pay out dividends for this exact reason – the investors want to see company valuation growth (and respectively share value growth) a lot more than the dividend payouts.
Additionally, a lot of these companies are not profitable because all the potential “profit” goes into expanding the current business and acquiring new businesses.
To give another example, let’s say I’ve made $100 this year in revenue. The expenses were $50, and I borrowed an extra $10 to invest $60 into a new business. So technically I didn’t make a profit (even though I easily could) because all my money went into growing and expanding my current business.
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