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Rod sold shares at $20, then the other $19 is economic value added, of some description.
That $19, is it
- as "real" as profit.
Yes
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Very real to the car dealer though, who hands over a real Ferrari in return.
Don't get me wrong, I respect tax paid profits and dividends far, far more than moonshot equity in a profitless firm. I understand your argument and partially accept it, to a point.
But I can't go that next step and argue no value has been created here.
Put it this way.
If New Zealand could create 1000 Xero's, identical in market cap and employment prospects, what do you think this would do to our stock exchange, employment market, attraction to migrants and GDP?
If New Zealand could create 1000 lemonade stands run by young girls on their street of residence, what do you think this would do to our stock exchange, employment market, attraction to migrants and GDP?
Something listed on the stock exchange is really a promise of future value. If enough people agree to bid up a share price in respect of this promise, then this is a vote of confidence in the expectation of future value. Yet our tax system works on the basis of what you actually earn each year. The IRD wouldn't send you a tax bill for $1m just because you claim that you will be a gazillionaire earning gazillions in ten years time. This isn't becasue the IRD don't have confidence in you. It's because the IRD know you can't pay your tax until those gazillions in earnings actually start rolling in. Likewise, I would argue that a stock exchange listing does not guarantee a successful business will still be there in ten years time. It also doesn't guarantee that the listed company will