If Larry Page, Sergey Brin and Eric Schmidt announced tomorrow that they would do everything in their power to prevent GOOG from EVER paying dividends, buying back stock, or selling to another company, then that would be catastrophic for the share price, correct? This is a step beyond simply being disinterested in dividends and buybacks in the near term, but you seem to be confusing the two.
Anyone who purchased shares at that point would be doing so because of one of the following
1) They believe that Page, Brin and Schmidt will change their minds
2) They believe that control will be wrested away from Page, Brin and Schmidt by more buyback/dividend friendly management
3) They believe that other people will still buy for reasons 1,2, or 3. This is classic Keynes Beauty Contest investing.
GOOG could still grow its revenues, but if it is guaranteed to never pay a dividend or buy back stock (Berkshire Hathaway doesn't pay dividends but Buffett has said he would definitely pursue share buybacks under certain conditions) or sell its assets, then there is no way to get cash out of GOOG except by trading with other beauty contest investors. The only thing left to anchor GOOG stock value to Google the company is the possibility of bankruptcy.
So yetanotherphd is 100% correct. It's not impossible for people to trade as if there's no connection between a company's future dividends/buybacks/asset sales and its stock price. But that's how you end up buying tulip bulbs for their weight in gold.
Anyone who purchased shares at that point would be doing so because of one of the following 1) They believe that Page, Brin and Schmidt will change their minds 2) They believe that control will be wrested away from Page, Brin and Schmidt by more buyback/dividend friendly management 3) They believe that other people will still buy for reasons 1,2, or 3. This is classic Keynes Beauty Contest investing.
GOOG could still grow its revenues, but if it is guaranteed to never pay a dividend or buy back stock (Berkshire Hathaway doesn't pay dividends but Buffett has said he would definitely pursue share buybacks under certain conditions) or sell its assets, then there is no way to get cash out of GOOG except by trading with other beauty contest investors. The only thing left to anchor GOOG stock value to Google the company is the possibility of bankruptcy.
So yetanotherphd is 100% correct. It's not impossible for people to trade as if there's no connection between a company's future dividends/buybacks/asset sales and its stock price. But that's how you end up buying tulip bulbs for their weight in gold.