After a company lists on the stock market, besides doing an excellent job for shareholders, one of the other functions is to pay attention to what the market wants or thinks it wants in the future. For example when there is a low interest environment, having debt to take advantage of the low rates is a good thing. If interest rates went up, debt would be bad and the company would be penalized for too much debt. All companies look to the future to see what the world may look like and how they will continue to look after customers and do the right thing for customers and shareholders.
In an article by Aishwarya Nair of Reuters, Ford Motor Company said it will boost spending on electric vehicles to $50 billion and run its EV unit separately from its legacy combustion-engine business.
Chief Executive Jim Farley said Ford plans to build more than 2 million EVs in 2026 or EV will be about 1/3 of the production and rise to 50% by 2030. The EV unit will be run by Doug Field.
The stock market has put a premium on Tesla stock and Ford splitting into 2, while making practical sense also allows some of the premium the market gives to Electric Car manufacturers to Ford stock. The reason why it makes sense is the component makeup of vehicles is different as electric vehicles use less parts than combustion engine cars.
Linking to dividend paying stocks, while the first priority of any company is to run the business to make a profit and then pay dividends, all companies examine their share price relative to the competition. Company management sometimes wonder how to ensure the stock price is very comparable or why the market values one company more than another. Could it do what the market is rewarding while making common sense for management?
There are more questions than answers, till the next time – to raising questions.