Greenlight Company Presentation
A Word About Growth Companies
Cash Distributors Can Be Great Growth Businesses For Decades
o Silicon Valley Myth:
A company that makes more money than can effectively reinvest isn't a
growth company.
o Reality:
Innovation has nothing to do with how many R&D dollars you have.
Steve Jobs, Fortune, November 9, 1998
Coca-Cola
Greenlight Capital, Inc.
IBM
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Let's debunk a myth about growth companies.
Cash hoarders looking to rationalize their hoarding like to postulate, "If you distribute cash to
shareholders, doesn't that signal that you are no longer a growth company because you have no
good use for the cash?"
My first thought is, doesn't letting tens of billions of dollars accumulate on the balance sheet for years
on end also reveal an inability to find good use for the cash?
My second thought is that the better the business, the more likely it is to generate more cash than it
needs. The excess cash reflects the success of prior investments, which were made in the hopes of
generating a lot of profits. When a business doesn't require every penny to be reinvested, it doesn't
mean the business can't grow. It just means that the growth of the business is limited by something
other than cash.
Some businesses are very capital intensive. For those businesses, growth correlates closely with
their ability to invest in fixed assets and working capital to fund expansion. Other businesses are not
capital intensive. Their growth is limited by their ability to find customers or to innovate. Most
successful IP-driven businesses earn cash in excess of reinvestment needs even during periods of
strong growth. Their investments have more to do with brains than money.
As Coke and IBM have shown for decades, cash distributors can still be great growth businesses.
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