When you buy stocks you supposedly buy a share of the company. You own part of it. When companies pay dividends, they are sharing their profits among the owners. That was the original idea.
Now when you own a company's stocks, you are not really an owner. You can't sell your stocks back to the company. You can only make money on your stocks by selling them to a new investor, for more than you paid.
More or less. Let's see what's next....
When a company doesn't pay dividends, there is no limit to how many shares it can print. Because it doesn't have to worry about the buyers of those stocks. They will never get shares of the profit, and will never have a say in how the company is run. They are not owners.
Sorry, that is not correct.
Dividends are not the same thing as voting rights. Those two aspects are independent from each other.
Companies often have different classes of shares. Some may have guaranteed dividends but not voting rights (preferred shares). Some classes have more voting power than others.
Offering dividends don't place any sort of limit on the total number of shares.
Plus, the markets react to issuance of new stocks. Investors don't like it when a company dilutes the stock. (
The Dangers of Share Dilution)
On a side note: Companies set limits on the number of shares in its articles of incorporation. However, the number is usually so high, that companies never hit that limit. Anyway....
You define Ponzi schemes as all or nothing -- only the originator makes money and everyone else gets screwed. But there are many examples of businesses where the earlier investors do well and later investors do less well.
That's... because... Ponzi schemes are a
specific type of fraud. Ponzi schemes don't have actual products or actual investments, they are completely fake. The scammer claims to be making real investments, but what he or she is really doing is taking money from new recruits to pay off the early investors. There are some instances where it starts out legitimate, and the organizer turns to fraud to hide losses. But the key is that it's not a real company with real profits and real products/services, it's a fraud.
E.g. Bernie Madoff took money from people, and at the start very likely provided real returns. Then he started lying about the returns, and claiming to offer modest but consistent returns month after month. The vast majority of investors did not withdraw their assets, so he fabricated paper returns for years on end, and Madoff was able to spend the money on himself and his family. It all came crashing down when too many people wanted to withdraw at once, and he couldn't cover the requests, because the money didn't actually exist.
Compare this to Tesla. There are lots of reasons to be critical of Tesla -- but
it's not a fraud. They build actual products, which ship to actual customers, from actual factories. Tesla may be overvalued and its CEO may be far less professional than he ought to be, but anyone who says "Tesla is a Ponzi scheme because it doesn't issue dividends" has absolutely no idea what they're talking about.
Maybe I should have said "pyramid" instead of Ponzi.
Nope. That doesn't apply either.
Pyramid schemes are also frauds, with no real product (or products with no real value). The difference is that in a pyramid scheme, when a person is recruited, they are promised a share of the revenues generated by the people that they in turn recruit.
That's obviously
not how stocks work. When you purchase stock, you are exchanging money (once) for the stock (once). If I purchase 10 shares of Apple stock, the person I bought it from gets $2,670 from me -- and that's it. The person who sold me their Apple shares do not get anything whatsoever if I sell all my shares for $3,000 or $30,000.
